**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C.  20549**
 **FORM
        10-Q**
 
 
 (Mark
        One)
 
 x
              QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
                FOR
                  THE QUARTERLY PERIOD ENDED**JUNE 30, 2007,** ORo
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
                FOR
                  THE TRANSITION PERIOD FROM _______________ TO
                  _________________
 Commission
        file number **1-14369**
 
 **AMERICAN
        COMMUNITY PROPERTIES TRUST**
 (Exact
        name of registrant as specified in its charter)
 
 **MARYLAND**
                (State
                  or other jurisdiction of incorporation or organization)
              **52-2058165**
                (I.R.S.
                  Employer Identification No.)
 **222
        Smallwood Village Center**
 **St.
        Charles, Maryland  20602**
 (Address
        of principal executive offices)(Zip Code)
 **(301)
        843-8600**
 (Registrant's
        telephone number, including area code)
 
 **Not
        Applicable**
 (Former
        name, former address and former fiscal year, if changed since last
        report)
 
 Indicate
        by check mark whether the registrant: (1) has filed all reports required
        to be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days.
 
 Yes
x                                No
        o
 
 
 Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, or a non-accelerated filer. See definition of “an accelerated
        filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
        one):
  
   Large
        accelerated filer o                                                      Accelerated
        filer
oNon-accelerated
        filer x
   
   Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
   Yes
o
        No x
  
 
 
 
 **As
        of August 9, 2007, there were 5,229,954 Common Shares, par value $0.01 per
        share, issued and outstanding**
  ***-
            1 -***
  **AMERICAN
        COMMUNITY PROPERTIES TRUST**
 **FORM
        10-Q**
 **JUNE
        30, 2007**
 **TABLE
        OF CONTENTS**
 Page
                  Number**PART
                  I**
              **FINANCIAL
                  INFORMATION**Item
                  1.
              Consolidated
                  Financial StatementsConsolidated
                  Statements of Income for the Six Months Ended
                  June 30, 2007 (Unaudited) and June 30, 2006
                  (Unaudited)
              3Consolidated
                  Statements of Income for the Three Months
                  Ended June 30, 2007 (Unaudited) and June 30, 2006
                  (Unaudited)
              4Consolidated
                  Balance Sheets as of June 30, 2007
                  (Unaudited) and December 31, 2006 (Audited)
              5Consolidated
                  Statement of Changes in
                  Shareholders' Equity for the Six Months Ended June 30, 2007
                  (Unaudited)
              6Consolidated
                  Statements of Cash Flows for the Six Months
                  Ended June 30, 2007 (Unaudited) and June 30, 2006
                  (Unaudited)
              7Notes
                  to Consolidated Financial Statements
                  (Unaudited)
              8Item
                  2.
              Management's
                  Discussion and Analysis of Financial Condition
                  and Results of Operations for the Six Months Ended June 30, 2007
                  and
                  2006
              21Item
                  3.
              Quantitative
                  and Qualitative Disclosures about Market
                  Risk
              31Item
                  4.
              Controls
                  and Procedures
              31**PART
                  II**
              **OTHER
                  INFORMATION**Item
                  1.
              Legal
                  Proceedings
              32Item
                  1A.
              Risk
                  Factors
              32Item
                  2
              Unregistered
                  Sales of Equity Securities and Use
                  of Proceeds
              32Item
                  3.
              Defaults
                  Upon Senior Securities
              32Item
                  4.
              Submission
                  of Matters to a Vote of Security
                  Holders
              32Item
                  5.
              Other
                  Information
              32Item
                  6.
              Exhibits
              32Signatures
              33
 
  ***-
            2 -***
 ***Table
            of
            Contents***
  
 **AMERICAN
                  COMMUNITY PROPERTIES
                  TRUST****CONSOLIDATED
                  STATEMENTS OF INCOME****FOR
                  THE SIX MONTHS ENDED JUNE 30**(In
                  thousands, except per share amounts)(Unaudited)**2007**
              
              
              **2006****Revenues**Rental
                  property
              
              **$**
              **29,832**
              
              
              $
              26,138Community
                  development-land sales
              
              ****
              **5,969**
              
              
              
              6,626Homebuilding-home
                  sales
              
              ****
              **5,214**
              
              
              
              11,259Management
                  and other fees, substantially all from related entities
              
              ****
              **506**
              
              
              
              565Reimbursement
                  of expenses related to managed entities
              
              ****
              **893**
              
              
              
              1,104Total
                  revenues
              
              ****
              **42,414**
              
              
              
              45,692**Expenses**Rental
                  property operating expenses
              
              ****
              **15,114**
              
              
              
              12,816Cost
                  of land sales
              
              ****
              **4,356**
              
              
              
              3,666Cost
                  of home sales
              
              ****
              **3,816**
              
              
              
              8,521General,
                  administrative, selling and marketing
              
              ****
              **5,368**
              
              
              
              4,534Depreciation
                  and amortization
              
              ****
              **4,581**
              
              
              
              4,074Expenses
                  reimbursed from managed entities
              
              ****
              **893**
              
              
              
              1,104Total
                  expenses
              
              ****
              **34,128**
              
              
              
              34,715**Operating
                  Income**
              
              ****
              **8,286**
              
              
              
              10,977**Other
                  income (expense)**Interest
                  and other income
              
              ****
              **890**
              
              
              
              218Equity
                  in earnings from unconsolidated entities
              
              ****
              **1,845**
              
              
              
              343Interest
                  expense
              
              ****
              **(9,337**
              **)**
              
              
              (7,200
              )Minority
                  interest in consolidated entities
              
              ****
              **(1,557**
              **)**
              
              
              (2,666
              )**Income
                  before provision for income taxes**
              
              ****
              **127**
              
              
              
              1,672**Provision
                  for income taxes**
              
              ****
              **288**
              
              
              
              714**Net
                  (loss) income**
              
              **$**
              **(161**
              **)**
              
              $
              958**Earnings
                  per share****Basic**
              
              **$**
              **(0.03**
              **)**
              
              $
              0.18**Weighted
                  average shares outstanding****Basic
                  and Diluted**
              
              ****
              **5,210**
              
              
              
              5,198**Cash
                  dividends per share**
              
              **$**
              **0.20**
              
              
              $
              0.63*The
                  accompanying notes are an integral part of these consolidated
                  statements.*
  ***-
            3 -***
 ***Table
            of Contents***
  
 **AMERICAN
                  COMMUNITY PROPERTIES
                  TRUST****CONSOLIDATED
                  STATEMENTS OF INCOME****FOR
                  THE THREE MONTHS ENDED JUNE 30**(In
                  thousands, except per share amounts)(Unaudited)**2007**
              
              
              **2006****Revenues**Rental
                  property
              
              **$**
              **15,422**
              
              
              $
              13,347Community
                  development-land sales
              
              ****
              **2,214**
              
              
              
              2,682Homebuilding-home
                  sales
              
              ****
              **2,126**
              
              
              
              7,234Management
                  and other fees, substantially all from related entities
              
              ****
              **243**
              
              
              
              275Reimbursement
                  of expenses related to managed entities
              
              ****
              **422**
              
              
              
              532Total
                  revenues
              
              ****
              **20,427**
              
              
              
              24,070**Expenses**Rental
                  property operating expenses
              
              ****
              **7,758**
              
              
              
              6,628Cost
                  of land sales
              
              ****
              **1,440**
              
              
              
              1,430Cost
                  of home sales
              
              ****
              **1,530**
              
              
              
              5,487General,
                  administrative, selling and marketing
              
              ****
              **2,905**
              
              
              
              2,102Depreciation
                  and amortization
              
              ****
              **2,397**
              
              
              
              2,101Expenses
                  reimbursed from managed entities
              
              ****
              **422**
              
              
              
              532Total
                  expenses
              
              ****
              **16,452**
              
              
              
              18,280**Operating
                  Income**
              
              ****
              **3,975**
              
              
              
              5,790**Other
                  income (expense)**Interest
                  and other income
              
              ****
              **338**
              
              
              
              89Equity
                  in earnings from unconsolidated entities
              
              ****
              **172**
              
              
              
              173Interest
                  expense
              
              ****
              **(4,720**
              **)**
              
              
              (3,699
              )Minority
                  interest in consolidated entities
              
              ****
              **(185**
              **)**
              
              
              (1,601
              )**Income
                  (loss) before provision (benefit) for income
                  taxes**
              
              ****
              **(420**
              **)**
              
              
              752**Provision
                  (benefit) for income taxes**
              
              ****
              **(235**
              **)**
              
              
              295**Net
                  (loss) income**
              
              **$**
              **(185**
              **)**
              
              $
              457**Earnings
                  per share****Basic**
              
              **$**
              **(0.03**
              **)**
              
              $
              0.09**Weighted
                  average shares outstanding****Basic
                  and Diluted**
              
              ****
              **5,210**
              
              
              
              5,198**Cash
                  dividends per share**
              
              **$**
              **0.10**
              
              
              $
              0.10*The
                  accompanying notes are an integral part of these consolidated
                  statements.*
 
  ***-
            4 -***
 ***Table
            of Contents***
  
 
 **AMERICAN
                  COMMUNITY PROPERTIES
                  TRUST****CONSOLIDATED
                  BALANCE SHEETS****(In
                  thousands, except share and per share amounts)****As
                  of June 30, 2007**
                **(Unaudited)**
              
              
              As
                  of
                December
                  31, 2006
                (Audited)**ASSETS****ASSETS:**Investments
                  in real estate:Operating
                  real estate, net of accumulated depreciation
              
              **$**
              **166,211**
              
              
              $
              142,046of
                  $146,832 and $142,458 respectivelyLand
                  and development costs
              
              
              **75,298**
              
              
              
              67,993Condominiums
                  under construction
              
              
              **5,842**
              
              
              
              9,265Rental
                  projects under construction or development
              
              
              **488**
              
              
              
              24,143Investments
                  in real estate, net
              
              
              **247,839**
              
              
              
              243,447Cash
                  and cash equivalents
              
              
              **22,303**
              
              
              
              27,459Restricted
                  cash and escrow deposits
              
              
              **22,601**
              
              
              
              19,677Investments
                  in unconsolidated real estate entities
              
              
              **6,577**
              
              
              
              6,591Receivable
                  from bond proceeds
              
              
              **10,425**
              
              
              
              13,710Accounts
                  receivable
              
              
              **3,225**
              
              
              
              4,320Deferred
                  tax assets
              
              
              **30,260**
              
              
              
              18,157Property
                  and equipment, net of accumulated depreciation
              
              
              **1,184**
              
              
              
              1,157Deferred
                  charges and other assets, net of amortization of$2,319
                  and $1,655 respectively
              
              
              **10,663**
              
              
              
              12,181**Total
                  Assets**
              
              **$**
              **355,077**
              
              
              **$**
              **346,699****LIABILITIES AND SHAREHOLDERS' EQUITY****LIABILITIES:**Non-recourse
                  debt
              
              **$**
              **280,668**
              
              
              $
              270,720Recourse
                  debt
              
              
              **26,383**
              
              
              
              29,351Accounts
                  payable and accrued liabilities
              
              
              **19,431**
              
              
              
              24,191Deferred
                  income
              
              
              **3,205**
              
              
              
              3,591Accrued
                  current income tax liability
              
              ****
              **12,123**
              
              
              ****
              2,992**Total
                  Liabilities**
              
              ****
              **341,810**
              
              
              ****
              330,845**SHAREHOLDERS'
                  EQUITY******Common
                  shares, $.01 par value, 10,000,000 shares authorized,5,229,954
                  shares issued and outstanding as of June 30, 2007and
                  December 31, 2006
              
              
              **52**
              
              
              
              52Treasury
                  stock, 67,709 shares at cost
              
              
              **(376**
              **)**
              
              
              (376
              )Additional
                  paid-in capital
              
              
              **17,302**
              
              
              
              17,238Retained
                  (deficit) earnings
              
              
              **(3,711**
              **)**
              
              
              (1,060
              )Total
                  Shareholders' Equity
              
              ****
              **13,267**
              
              
              ****
              15,854**Total
                  Liabilities and Shareholders' Equity**
              
              **$**
              **355,077**
              
              
              $
              346,699*The
                  accompanying notes are an integral part of these consolidated
                  statements.*
 
  ***-
            5 -***
 ***Table
            of Contents***
  
 
 
 **AMERICAN
                  COMMUNITY PROPERTIES
                  TRUST****CONSOLIDATED
                  STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY**(In
                  thousands, except share amounts)**Common
                  Shares**
              
              
              
              
              
              **Additional**
              
              
              **Retained****Par**
              
              
              **Treasury**
              
              
              **Paid-in**
              
              
              **(Deficit)****Number**
              
              
              **Value**
              
              
              **Stock**
              
              
              **Capital**
              
              
              **Earnings**
              
              
              **Total**Balance
                  December 31, 2006 (Audited)
              
              
              5,229,954
              
              
              $
              52
              
              
              $
              (376
              )
              
              $
              17,238
              
              
              $
              (1,060
              )
              
              $
              15,854Net
                  income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (161
              )
              
              
              (161
              )Dividends
                  paid
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,032
              )
              
              
              (1,032
              )Cumulative
                  effect of change in accounting for FIN 48
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,458
              )
              
              
              (1,458
              )Amortization
                  of Trustee Restricted Shares
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              64
              
              
              
              -
              
              
              
              64**Balance
                  June 30, 2007 (Unaudited)**
              
              ****
              **5,229,954**
              
              
              **$**
              **52**
              
              
              **$**
              **(376**
              **)**
              
              **$**
              **17,302**
              
              
              **$**
              **(3,711**
              **)**
              
              **$**
              **13,267***The
                  accompanying notes are an integral part of those consolidated
                  statements.*
  ***-
            6 -***
 ***Table
            of Contents***
  
 
 **AMERICAN
                  COMMUNITY PROPERTIES
                  TRUST****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS****FOR
                  THE SIX MONTHS ENDED JUNE 30**(In
                  thousands)(Unaudited)**2007**
              
              
              2006**Cash
                  Flows from Operating Activities**Net
                  (loss) income
              
              **$**
              **(161**
              **)**
              
              $
              958Adjustments
                  to reconcile net income to net cash provided byoperating
                  activities:Depreciation
                  and amortization
              
              ****
              **4,581**
              
              
              
              4,074Distribution
                  to minority interests in excess of basis
              
              ****
              **1,827**
              
              
              
              2,646Benefit
                  for deferred income taxes
              
              ****
              **(2,229**
              **)**
              
              
              (716
              )Equity
                  in earnings-unconsolidated entities
              
              ****
              **(1,845**
              **)**
              
              
              (343
              )Distribution
                  of earnings from unconsolidated entities
              
              ****
              **346**
              
              
              
              339Cost
                  of land sales
              
              ****
              **4,356**
              
              
              
              3,666Cost
                  of home sales
              
              ****
              **3,816**
              
              
              
              8,521Stock
                  based compensation expense
              
              ****
              **104**
              
              
              
              102Amortization
                  of deferred loan costs
              
              ****
              **478**
              
              
              
              275Changes
                  in notes and accounts receivable
              
              ****
              **1,095**
              
              
              
              80Additions
                  to community development assets
              
              ****
              **(13,661**
              **)**
              
              
              (9,475
              )Right
                  of way easement
              
              ****
              **2,000**
              
              
              
              -Homebuilding-construction
                  expenditures
              
              ****
              **(393**
              **)**
              
              
              (4,354
              )Deferred
                  income-joint venture
              
              ****
              **(386**
              **)**
              
              
              130Changes
                  in accounts payable, accrued liabilities
              
              ****
              **(7,000**
              **)**
              
              
              (3,588
              )Net
                  cash (used in) provided by operating activities
              
              ****
              **(7,072**
              **)**
              
              
              2,315**Cash****Flows
                  from Investing Activities**Investment
                  in apartment construction
              
              ****
              **(233**
              **)**
              
              
              (7,747
              )Change
                  in investments - unconsolidated entities
              
              ****
              **1,513**
              
              
              
              (1
              )Cash
                  from newly consolidated properties
              
              ****
              **-**
              
              
              
              4,723Change
                  in restricted cash
              
              ****
              **(2,924**
              **)**
              
              
              (1,513
              )Additions
                  to rental operating properties, net
              
              ****
              **(4,708**
              **)**
              
              
              (18,795
              )Other
                  assets
              
              ****
              **863**
              
              
              
              248Net
                  cash used in investing activities
              
              ****
              **(5,489**
              **)**
              
              
              (23,085
              )**Cash****Flows
                  from Financing Activities**Cash
                  proceeds from debt financing
              
              ****
              **23,339**
              
              
              
              37,279Payment
                  of debt
              
              ****
              **(18,720**
              **)**
              
              
              (19,399
              )County
                  Bonds proceeds, net of undisbursed funds
              
              ****
              **5,645**
              
              
              
              1,077Payments
                  of distributions to minority interests
              
              ****
              **(1,827**
              **)**
              
              
              (2,646
              )Dividends
                  paid to shareholders
              
              ****
              **(1,032**
              **)**
              
              
              (3,232
              )Net
                  cash provided by financing activities
              
              ****
              **7,405**
              
              
              
              13,079**Net
                  Decrease in Cash and Cash Equivalents**
              
              ****
              **(5,156**
              **)**
              
              
              (7,691
              )**Cash
                  and Cash Equivalents, Beginning of Period**
              
              ****
              **27,459**
              
              
              
              21,156**Cash
                  and Cash Equivalents, End of Period**
              
              **$**
              **22,303**
              
              
              $
              13,465*The
                  accompanying notes are an integral part of these consolidated
                  statements.*
  ***-
            7 -***
 ***Table
            of Contents***
  **AMERICAN
        COMMUNITY PROPERTIES TRUST**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2007**
 (Unaudited)
 
 **(1)**
              **ORGANIZATION**
 
 American
        Community Properties Trust
        ("ACPT") is a self-managed holding company that is primarily engaged in the
        investment of rental properties, property management services, community
        development, and homebuilding.  These operations are concentrated in
        the Washington, D.C. metropolitan area and Puerto Rico and are carried out
        through American Rental Properties Trust ("ARPT"), American Rental Management
        Company ("ARMC "), American Land Development U.S., Inc. ("ALD") and IGP Group
        Corp. ("IGP Group") and their subsidiaries.
 ACPT
        is taxed as a U.S. partnership and
        its taxable income flows through to its shareholders.  ACPT is subject to
        Puerto Rico taxes on IGP Group's taxable income, generating foreign tax credits
        that are passed through to ACPT's shareholders.  An IRS regulation
        eliminating the pass through of these tax credits to ACPT’s shareholders has
        been proposed and is expected to become effective in 2007.  ACPT's federal
        taxable income consists of certain passive income from IGP Group, a controlled
        foreign corporation, distributions from IGP Group, and dividends from ACPT's
        U.S. subsidiaries.  Other than Interstate Commercial Properties ("ICP"),
        which is taxed as a Puerto Rico corporation, the taxable income from the
        remaining Puerto Rico operating entities passes through to IGP Group or
        ALD.  Of this taxable income, only the portion of taxable income applicable
        to the profits, losses or gains on the residential land sold in Parque Escorial
        passes through to ALD.  ALD, ARMC, and ARPT are taxed as U.S.
        corporations.  The taxable income from the U.S. apartment properties flows
        through to ARPT.
 
 **(2)**
              **BASIS
                  OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
                  POLICIES**
 
 **Basis
        of Presentation**
 The
        accompanying consolidated financial statements include the accounts of American
        Community Properties Trust and its majority owned subsidiaries and partnerships,
        after eliminating all intercompany transactions.  All of the entities
        included in the consolidated financial statements are hereinafter referred
        to
        collectively as the "Company" or "ACPT."
 The
        Company consolidates entities that are not variable interest entities as
        defined
        by Financial Accounting Standard Board (“FASB”) Interpretation No. 46 (revised
        December 2003) (“FIN 46 (R)”) in which it owns, directly or indirectly, a
        majority voting interest in the entity.  In addition, the Company
        consolidates entities, regardless of ownership percentage, in which the Company
        serves as the general partner and the limited partners do not have substantive
        kick-out rights or substantive participation rights in accordance with Emerging
        Issues Task Force Issue 04-05, "*Determining Whether a General Partner, or
        the General Partners as a Group, Controls a Limited Partnership or Similar
        Entity When the Limited Partners Have Certain Rights*," (“EITF
        04-05”).  The assets of consolidated real estate partnerships not 100%
        owned by the Company are generally not available to pay creditors of the
        Company.
 The consolidated group includes ACPT and its four major subsidiaries, American
        Rental Properties Trust, American Rental Management Company, American Land
        Development U.S., Inc., and IGP Group Corp.  In addition, the
        consolidated group includes the following other entities:
 Alturas
                  del Senorial Associates Limited Partnership
              
              LDA
                  Group, LLCAmerican
                  Housing Management Company
              
              Milford
                  Station I, LLCAmerican
                  Housing Properties L.P.
              
              Milford
                  Station II, LLCBannister
                  Associates Limited Partnership
              
              Monserrate
                  Associates Limited PartnershipBayamon
                  Garden Associates Limited Partnership
              
              New
                  Forest Apartments, LLCCarolina
                  Associates Limited Partnership S.E.
              
              Nottingham
                  South, LLCCoachman's
                  Apartments, LLC
              
              Owings
                  Chase, LLCColinas
                  de San Juan Associates Limited Partnership
              
              Palmer
                  Apartments Associates Limited PartnershipCrossland
                  Associates Limited Partnership
              
              Prescott
                  Square, LLCEscorial
                  Office Building I, Inc.
              
              St.
                  Charles Community, LLCEssex
                  Apartments Associates Limited Partnership
              
              San
                  Anton Associates S.E.Fox
                  Chase Apartments, LLC
              
              Sheffield
                  Greens Apartments, LLCHeaden
                  House Associates Limited Partnership
              
              Torres
                  del Escorial, Inc.Huntington
                  Associates Limited Partnership
              
              Turabo
                  Limited Dividend PartnershipInterstate
                  Commercial Properties, Inc.
              
              Valle
                  del Sol Associates Limited PartnershipInterstate
                  General Properties Limited Partnership, S.E.
              
              Village
                  Lake Apartments, LLCJardines
                  de Caparra Associates Limited Partnership
              
              Wakefield
                  Terrace Associates Limited PartnershipLancaster
                  Apartments Limited Partnership
              
              Wakefield
                  Third Age Associates Limited PartnershipLand
                  Development Associates S.E.
 ***-
            8 -***
 ***Table
            of Contents***
 The
            Company's investments in entities
            that it does not control are recorded using the equity method of
            accounting.  Refer to Note 3 for further discussion regarding
            Investments in Unconsolidated Real Estate Entities.
 **Interim
        Financial Reporting**
 These
        unaudited financial statements have been prepared in accordance with accounting
        principles generally accepted in the United States ("GAAP") for interim
        financial information and pursuant to the rules and regulations of the
        Securities and Exchange Commission. Certain information and note disclosures
        normally included in financial statements prepared in accordance with GAAP
        have
        been condensed or omitted. The Company has no items of other comprehensive
        income for any of the periods presented. In the opinion of management, these
        unaudited financial statements reflect all adjustments (which are of a normal
        recurring nature) necessary to present a fair statement of results for the
        interim period. While management believes that the disclosures presented
        are
        adequate to make the information not misleading, these financial statements
        should be read in conjunction with the financial statements and the notes
        thereto included in the Company's Annual Report filed on Form 10-K for the
        year
        ended December 31, 2006.  The operating results for the six and three
        months ended June 30, 2007 and 2006 are not necessarily indicative of the
        results that may be expected for the full year. Net income per share is
        calculated based on weighted average shares outstanding.
 
 **Use
        of Estimates**
 The
        preparation of financial statements in conformity with GAAP requires management
        to make estimates and assumptions that affect the amounts reported in the
        financial statements, and accompanying notes and disclosures. These estimates
        and assumptions are prepared using management's best judgment after considering
        past and current events and economic conditions. Actual results could differ
        from those estimates and assumptions.
 
 **Implementation
        of FIN 48**
 In
        July
        2006, the FASB issued FASB Interpretation No. 48, “*Accounting for
        Uncertainty in Income Taxes*” (“FIN 48”). FIN 48 is an interpretation of
        FASB Statement No. 109, “*Accounting for Income Taxes*,” and it
        seeks to reduce the diversity in practice associated with certain aspects
        of
        measurement and recognition in accounting for income taxes. In addition,
        FIN 48
        requires expanded disclosure with respect to the uncertainty in income
        taxes.  The Company implemented FIN 48 as of January 1,
        2007.  See Note 7 for further discussions.
 
 **Cash
        Dividends**
 On
        February 28, 2007, the Board of Trustees declared a cash dividend of $0.10
        per
        share, payable on March 28, 2007, to shareholders of record on March 14,
        2007.  On May 15, 2007, the Board of Trustees declared a cash dividend
        of $0.10 per share, payable on June 13, 2007, to shareholders of record on
        May
        30, 2007.
 
 **Impairment
        of Long-Lived Assets**
 ACPT
        carries its rental properties,
        homebuilding inventory, land and development costs at the lower of cost or
        fair
        value in accordance with Statement of Financial Accounting Standards ("SFAS")
        No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
        For
        real estate assets such as our rental properties which the Company plans
        to hold
        and use, which includes property to be developed in the future, property
        currently under development and real estate projects that are completed or
        substantially complete, we evaluate whether the carrying amount of each of
        these
        assets will be recovered from their undiscounted future cash flows arising
        from
        their use and eventual disposition. If the carrying value were to be greater
        than the undiscounted future cash flows, we would recognize an impairment
        loss
        to the extent the carrying amount is not recoverable. Our estimates of the
        undiscounted operating cash flows expected to be generated by each asset
        are
        performed on an individual project basis and based on a number of assumptions
        that are subject to economic and market uncertainties, including, among others,
        demand for apartment units, competition, changes in market rental rates,
        and
        costs to operate and complete each project. There have been no impairment
        charges for the six- and three-month periods ended June 30, 2007 and 2006.
 The
        Company evaluates, on an individual project basis, whether the carrying value
        of
        its substantially completed real estate projects, such as our homebuilding
        inventory that are to be sold, will be recovered based on the fair value
        less
        cost to sell. If the carrying value were to be greater than the fair value
        less
        costs to sell, we would recognize an impairment loss to the extent the carrying
        amount is not recoverable. Our estimates of the fair value less costs to
        sell
        are based on a number of assumptions that are subject to economic and market
        uncertainties, including, among others, comparable sales, demand for commercial
        and residential lots and competition. The Company performed similar reviews
        for
        land held for future development and sale considering such factors as the
        cash
        flows associated with future development expenditures. Should this evaluation
        indicate an impairment has occurred, the Company will record an impairment
        charge equal to the excess of the historical cost over fair value less costs
        to
        sell.  There have been no impairment charges for the six- and
        three-month periods ended June 30, 2007 and 2006.
 
 **Depreciable
        Assets and Depreciation**
 The
        Company's operating real estate is stated at cost and includes all costs
        related
        to acquisitions, development and construction. The Company makes assessments
        of
        the useful lives of our real estate assets for purposes of determining the
        amount of depreciation expense to reflect on our income statement on an annual
        basis. The assessments, all of which are judgmental determinations, are as
        follows:
  ***-
            9 -***
 ***Table
            of Contents***
  
 ·
              Buildings
                  and improvements are depreciated over five to forty years using
                  the
                  straight-line or double-declining balance
                  methods,
 ·
              Furniture,
                  fixtures and equipment are depreciated over five to seven years
                  using the
                  straight-line method,
 ·
              Leasehold
                  improvements are capitalized and depreciated over the lesser of
                  the life
                  of the lease or their estimated useful
                  life,
 ·
              Maintenance
                  and other repair costs are charged to operations as
                  incurred.
 
 The
        table
        below presents the major classes of depreciable assets as of June 30, 2007
        and
        December 31, 2006 (in thousands):
 
 **June
                  30,**
              December
                  31,**2007**
              2006**(Unaudited)**
              (Audited)Building
              **$             
                          264,410**
              $           
                           240,264Building
                  improvements
              **9,448**
              8,022Equipment
              **13,673**
              12,569**287,531**
              260,855*Less:*Accumulated depreciation
              **146,832**
              142,458**140,699**
              118,397Land
              **25,512**
              23,649Operating
                  properties, net
              **$              
                         166,211**
              $            
                          142,046
  *Other
        Property and Equipment*
 In
        addition, the Company owned other property and equipment of $1,184,000 and
        $1,157,000, net of accumulated depreciation of $2,202,000 and $2,101,000
        respectively, as of June 30, 2007, and December 31, 2006,
        respectively.
 
 *Depreciation*
 Total
        depreciation expense was $4,581,000 and $4,074,000 for the six months ended
        June
        30, 2007 and 2006, respectively, and $2,397,000 and $2,101,000 for the three
        months ended June 30, 2007 and 2006, respectively.
 
 **Impact
        of Recently Issued Accounting Standards**
 
 *SFAS
        157 and 159*
 In
        September 2006, the FASB issued SFAS 157, “*Fair Value Measurements*” and
        in February 2007, the FASB issued SFAS 159, *“The Fair Value Option for
        Financial Assets and Financial Liabilities.”*SFAS 157 defines
        fair values as the price that would be received to sell an asset or paid
        to
        transfer a liability in an orderly transaction between market participants
        in
        the market in which the reporting entity transacts. SFAS 157 applies whenever
        other standards require assets or liabilities to be measured at fair value
        and
        does not expand the use of fair value in any new circumstances. SFAS 157
        establishes a hierarchy that prioritizes the information used in developing
        fair
        value estimates. The hierarchy gives the highest priority to quoted prices
        in
        active markets and the lowest priority to unobservable data, such as the
        reporting entity’s own data. SFAS 157 requires fair value measurements to be
        disclosed by level within the fair value hierarchy. SFAS 157 is effective
        for
        fiscal years beginning after November 15, 2007.
 SFAS
        159
        permits entities to choose to measure many financial instruments and certain
        other items at fair value.  The fair value election is designed to
        improve financial reporting by providing entities with the opportunity to
        mitigate volatility in reported earnings caused by measuring related assets
        and
        liabilities differently without having to apply complex hedge accounting
        provisions.  SFAS 159 is effective for fiscal years beginning after
        November 15, 2007.  We have not yet determined the impact that SFAS
        157 and SFAS 159 will have on our financial statements.
 
 *EITF
        Issue No. 06-08*
 In
        November 2006, the Emerging Issues Task force of the FASB (“EITF”) reached a
        consensus on EITF Issue No. 06-08, “*Applicability of a Buyer’s Continuing
        Investment under FASB Statement No. 66, Accounting for Sales of Real Estate,
        for
        Sales of Condominiums*” (“EITF 06-08”).  EITF 06-08 will require
        condominium sales to meet the continuing investment criterion in FAS No.
        66 in
        order for profit to be recognized under the percentage-of-completion
        method.  EITF 06-08 will be effective for annual reporting periods
        beginning after March 15, 2007.  The cumulative effect of applying
        EITF 06-08, if any, is to be reported as an adjustment to the opening balance
        of
        retained earnings in the year of adoption.  We are evaluating the
        impact that EITF 06-08 may have, if any, on our financial
        statements.
 ***-
            10 -***
 ***Table
            of Contents***
  
 **(3)**
              **INVESTMENT
                  IN UNCONSOLIDATED REAL ESTATE
                  ENTITIES**
 
 The
        Company accounts for investments in unconsolidated real estate entities that
        are
        not considered variable interest entities under FIN 46(R) in accordance with
        SOP
        78-9 *"Accounting for Investments in Real Estate Ventures"*and APB
        Opinion No. 18 *"The Equity Method of Accounting for Investments in Common
        Stock"*. For entities that are considered variable interest entities under
        FIN 46(R), the Company performs an assessment to determine the primary
        beneficiary of the entity as required by FIN 46(R). The Company accounts
        for
        variable interest entities in which the Company is not a primary beneficiary
        and
        does not bear a majority of the risk of expected loss in accordance with
        the
        equity method of accounting.
 The
        Company considers many factors in determining whether or not an investment
        should be recorded under the equity method, such as economic and ownership
        interests, authority to make decisions, and contractual and substantive
        participating rights of the partners. Income and losses are recognized in
        accordance with the terms of the partnership agreements and any guarantee
        obligations or commitments for financial support. The Company's investments
        in
        unconsolidated real estate entities accounted for under the equity method
        of
        accounting currently consists of general partnership interests in two limited
        partnerships which own apartment properties in the United States; a limited
        partnership interest in a limited partnership that owns a commercial property
        in
        Puerto Rico; and a 50% ownership interest in a joint venture formed as a
        limited
        liability company.
 
 *Apartment
        Partnerships*
 The
        unconsolidated apartment partnerships as of June 30, 2007 and December 31,
        2006
        included Brookside Gardens Limited Partnership and Lakeside Apartments Limited
        Partnership that collectively represent 110 rental units.  We have
        determined that these two entities are variable interest entities under FIN
        46(R).  However, the Company is not required to consolidate the
        partnerships due to the fact that it is not the primary beneficiary and does
        not
        bear the majority of the risk of expected losses. The Company holds an economic
        interest in Brookside and Lakeside but, as a general partner, we have
        significant influence over operations of these entities that is disproportionate
        to our economic ownership.  In accordance with SOP 78-9 and APB No.
        18, these investments are accounted for under the equity method.  The
        Company is exposed to losses consisting of our net investment, loans and
        unpaid
        fees for Brookside of $201,000 and $189,000 and for Lakeside of $168,000
        and
        $172,000 as of June 30, 2007, and December 31, 2006,
        respectively.  All amounts are fully reserved. Pursuant to the
        partnership agreement for Brookside, the Company, as general partner, is
        responsible for providing operating deficit loans to the partnership in the
        event that it is not able to generate sufficient cash flows from its operating
        activities.
 
 *Commercial
        Partnerships*
 The
        Company holds a limited partner interest in a commercial property in Puerto
        Rico
        that it accounts for under the equity method of accounting.  ELI, S.E.
        ("ELI"), is a partnership formed for the purpose of constructing a building
        for
        lease to the State Insurance Fund of the Government of Puerto
        Rico.  ACPT contributed the land in exchange for $700,000 and a 27.82%
        ownership interest in the partnership's assets, equal to a 45.26% interest
        in
        cash flow generated by the thirty-year lease of the building.
 On
        April
        30, 2004, the Company purchased a 50% limited partnership interest in El
        Monte
        Properties, S.E. ("El Monte") from Insular Properties Limited Partnership
        ("Insular") for $1,462,500. Insular is owned by the J. Michael Wilson Family,
        a
        related party. In December 2004, a third-party buyer purchased El Monte for
        $20,000,000; $17,000,000 in cash and $3,000,000 in two notes of $1,500,000
        each
        that bear an interest rate of prime plus 2%, with a ceiling of 9%, and mature
        on
        December 3, 2009. The net cash proceeds from the sale of the real estate
        were
        distributed to the partners. As a result, the Company received $2,500,000
        in
        cash and recognized $986,000 of income in 2004. The gain on sale was reduced
        by
        the amount of the seller's note which is subject to future subordination.
        In
        January 2005, El Monte distributed the notes to the partners whereby the
        Company
        received a $1,500,000 note.  The Company determined that the cost
        recovery method of accounting was appropriate for this transaction and
        accordingly, deferred revenue recognition on this note until cash payment
        was
        received.  In January 2007, the Company received $1,707,000, equal to
        the full principal amount due plus all accrued interest outstanding and,
        accordingly, recognized $1,500,000 of equity in earnings from unconsolidated
        entities and $207,000 of interest income.  The Company has no required
        funding obligations and management expects to wind up El Monte’s affairs in
        2007.
 
 *Land
        Development Joint Venture*
 In
        September 2004, the Company entered into a joint venture agreement with Lennar
        Corporation for the development of a 352-unit, active adult community located
        in
        St. Charles, Maryland.  The Company manages the project's development
        for a market rate fee pursuant to a management agreement.  In
        September 2004, the Company transferred land to the joint venture in exchange
        for a 50% ownership interest and $4,277,000 in cash.  The Company's
        investment in the joint venture was recorded at 50% of the historical cost
        basis
        of the land with the other 50% recorded within our deferred charges and other
        assets.  The proceeds received are reflected as deferred revenue. The
        deferred revenue and related deferred costs will be recognized into income
        as
        the joint venture sells lots to Lennar.  In March 2005, the joint
        venture closed a non-recourse development loan, which was amended in June
        2006
        and again in December 2006.  Per the terms of the loan, both the
        Company and Lennar provided development completion
        guarantees.   In the six and three months ended June 30, 2007,
        the joint venture delivered 30 and 16 lots to Lennar, recognizing $655,000
        and
        $363,000 in deferred revenue, off-site fees and management fees and $218,000
        and
        $125,000 of deferred costs, respectively.
  ***-
            11 -***
 ***Table
            of Contents***
  The
        following table summarizes the
        financial data and principal activities of the unconsolidated real estate
        entities, which the Company accounts for under the equity method.  The
        information is presented to segregate the apartment partnerships from the
        commercial partnerships as well as our 50% ownership interest in the land
        development joint venture, which are all accounted for as “investments in
        unconsolidated real estate entities” on the balance sheet.
 
 LandDevelopmentApartment
              
              
              Commercial
              
              
              JointProperties
              
              
              Property
              
              
              Venture
              
              
              Total(in
                  thousands)**Summary
                  Financial Position:****Total
                  Assets**June
                  30, 2007
              
              $
              5,050
              
              
              $
              27,861
              
              
              $
              12,710
              
              
              $
              45,621December
                  31, 2006
              
              
              5,142
              
              
              
              27,726
              
              
              
              12,154
              
              
              
              45,022**Total
                  Non-Recourse Debt**June
                  30, 2007
              
              
              3,230
              
              
              
              22,960
              
              
              
              4,486
              
              
              
              30,676December
                  31, 2006
              
              
              3,244
              
              
              
              22,960
              
              
              
              3,476
              
              
              
              29,680**Total
                  Other Liabilities**June
                  30, 2007
              
              
              1,261
              
              
              
              693
              
              
              
              1,287
              
              
              
              3,241December
                  31, 2006
              
              
              1,242
              
              
              
              722
              
              
              
              1,744
              
              
              
              3,708**Total
                  Equity**June
                  30, 2007
              
              
              559
              
              
              
              4,208
              
              
              
              6,937
              
              
              
              11,704December
                  31, 2006
              
              
              656
              
              
              
              4,044
              
              
              
              6,934
              
              
              
              11,634**Company's
                  Investment, net (1)**June
                  30, 2007
              
              
              -
              
              
              
              4,749
              
              
              
              1,828
              
              
              
              6,577December
                  31, 2006
              
              
              -
              
              
              
              4,763
              
              
              
              1,828
              
              
              
              6,591**Summary
                  of Operations:****Total
                  Revenue**Six
                  Months Ended June 30, 2007
              
              $
              401
              
              
              $
              1,821
              
              
              $
              3,609
              
              
              $
              5,831Six
                  Months Ended June 30, 2006
              
              
              392
              
              
              
              1,828
              
              
              
              -
              
              
              
              2,220Three
                  Months Ended June 30, 2007
              
              
              231
              
              
              
              912
              
              
              
              1,735
              
              
              
              2,878Three
                  Months Ended June 30, 2006
              
              
              193
              
              
              
              915
              
              
              
              -
              
              
              
              1,108**Net
                  Income (Loss)**Six
                  Months Ended June 30, 2007
              
              
              (97
              )
              
              
              937
              
              
              
              3
              
              
              
              843Six
                  Months Ended June 30, 2006
              
              
              (58
              )
              
              
              926
              
              
              
              -
              
              
              
              868Three
                  Months Ended June 30, 2007
              
              
              (58
              )
              
              
              469
              
              
              
              3
              
              
              
              414Three
                  Months Ended June 30, 2006
              
              
              (31
              )
              
              
              468
              
              
              
              -
              
              
              
              437**Company's
                  recognition of equity in earnings**Six
                  Months Ended June 30, 2007
              
              
              (1
              )
              
              
              346
              
              
              
              -
              
              
              
              345Six
                  Months Ended June 30, 2006
              
              
              -
              
              
              
              343
              
              
              
              -
              
              
              
              343Three
                  Months Ended June 30, 2007
              
              
              (1
              )
              
              
              173
              
              
              
              -
              
              
              
              172Three
                  Months Ended June 30, 2006
              
              
              -
              
              
              
              173
              
              
              
              -
              
              
              
              173
 
 Notes:
 (1)  Represents
        the Company's net investment, including assets and accrued liabilities in
        the
        consolidated balance sheet for
 unconsolidated
        real estate entities.
  ***-
            12 -***
 ***Table
            of Contents***
  
 
 LandDevelopmentApartment
              
              
              Commercial
              
              
              JointPartnerships
              
              
              Partnerships
              
              
              Venture
              
              
              Total(In
                  thousands)**Summary
                  of Cash Flows:****Cash
                  Flows from Operating Activities**Six
                  Months Ended June 30, 2007
              
              $
              50
              
              
              $
              845
              
              
              $
              3,149
              
              
              $
              4,044Six
                  Months Ended June 30, 2006
              
              
              77
              
              
              
              1,032
              
              
              
              132
              
              
              
              1,241Three
                  Months Ended June 30, 2007
              
              
              16
              
              
              
              (17
              )
              
              
              1,791
              
              
              
              1,790Three
                  Months Ended June 30, 2006
              
              
              24
              
              
              
              173
              
              
              
              721
              
              
              
              918**Company's
                  Share of Cash Flows from Operating Activities**Six
                  Months Ended June 30, 2007
              
              
              1
              
              
              
              382
              
              
              
              1,575
              
              
              
              1,958Six
                  Months Ended June 30, 2006
              
              
              1
              
              
              
              467
              
              
              
              66
              
              
              
              534Three
                  Months Ended June 30, 2007
              
              
              1
              
              
              
              (8
              )
              
              
              896
              
              
              
              889Three
                  Months Ended June 30, 2006
              
              
              -
              
              
              
              78
              
              
              
              361
              
              
              
              439**Operating
                  Cash Distributions**Six
                  Months Ended June 30, 2007
              
              
              -
              
              
              
              794
              
              
              
              -
              
              
              
              794Six
                  Months Ended June 30, 2006
              
              
              -
              
              
              
              747
              
              
              
              -
              
              
              
              747Three
                  Months Ended June 30, 2007
              
              
              -
              
              
              
              383
              
              
              
              -
              
              
              
              383Three
                  Months Ended June 30, 2006
              
              
              -
              
              
              
              388
              
              
              
              -
              
              
              
              388**Company's
                  Share of Operating Cash Distributions**Six
                  Months Ended June 30, 2007
              
              
              -
              
              
              
              360
              
              
              
              -
              
              
              
              360Six
                  Months Ended June 30, 2006
              
              
              -
              
              
              
              339
              
              
              
              -
              
              
              
              339Three
                  Months Ended June 30, 2007
              
              
              -
              
              
              
              174
              
              
              
              -
              
              
              
              174Three
                  Months Ended June 30, 2006
              
              
              -
              
              
              
              176
              
              
              
              -
              
              
              
              176
  ***-
            13 -***
 ***Table
            of Contents***
  **(4)**
              **DEBT**
 
 The
        Company's outstanding debt is collateralized primarily by land, land
        improvements, receivables, investment properties, investments in partnerships,
        and rental properties.  The following table summarizes the
        indebtedness of the Company at June 30, 2007 and December 31, 2006 (in
        thousands):
 
 Maturity
              Interest
              Outstanding
                  as ofDates
              Rates
              **June
                  30,**
              December
                  31,From/To
              From/To
              **2007**
              2006**(Unaudited)**
              (Audited)**Recourse
                  Debt**Community
                  Development (a), (b), (c)
              08-31-08/03-01-22
              4%/8%
              **$                   26,255**
              $             24,694Investment
                  Properties (d)
              PAID
              P+1.25%/6.98%
              **-**
              4,473General
                  obligations (e)
              07-29-07/01-01-12
              Non-interestbearing/8.10%
              **128**
              184**Total
                  Recourse Debt**
              
              
              **26,383**
              29,351**Non-Recourse
                  Debt**Community
                  Development (f)
              11-23-07
              Non-interest
                  bearing
              **500**
              500Investment
                  Properties (g)
              04-30-09/08-01-47
              4.95%/10%
              **280,168**
              270,220**Total
                  Non-Recourse Debt**
              
              
              **280,668**
              270,720**Total
                  debt**
              
              
              **$                 307,051**
              $            300,071
 
 a)
              As
                  of June 30, 2007, $24,455,000 of the community development recourse
                  debt
                  relates to the general obligation bonds issued by the Charles County
                  government as described in detail under the heading "Financial
                  Commitments" in Note 5.
 b)
              On
                  April 14, 2006, the Company closed a three year $14,000,000 revolving
                  acquisition and development line of credit loan (“the Revolver”) secured
                  by a first lien deed  of trust on property located in St.
                  Charles, MD.  The maximum amount of the loan at any one time is
                  $14,000,000.  The facility includes various sub-limits on a
                  revolving basis for amounts to finance apartment project acquisitions
                  and
                  land development in St. Charles.  The terms require certain
                  financial covenants to be calculated annually as of December 31,
                  including
                  a tangible net worth to senior debt ratio for ALD and a minimum
                  net worth
                  test for ACPT.  As of June 30, 2007, the Company was in
                  compliance with these financial covenants.  However, no amounts
                  were outstanding on the Revolver.
 c)
              On
                  September 1, 2006, LDA secured a revolving line of credit facility
                  of
                  $15,000,000 to be utilized as follows: (i) to repay its outstanding
                  loan
                  of $800,000; and (ii) to fund development costs of a project in
                  which the
                  Company plans to develop a planned community in Canovanas, Puerto
                  Rico, to
                  fund acquisitions and/or investments mainly in estate ventures,
                  to fund
                  transaction costs and expenses, to fund future payments of interest
                  under
                  the line of credit and to fund any future working capital needs
                  of the
                  Company.  The line of credit bears interest at a fluctuating
                  rate equivalent to the LIBOR Rate plus 200 basis points (7.35%
                  at June 30,
                  2007) and matures on August 31, 2008.  The outstanding balance
                  of this facility on June 30, 2007, was
                  $1,800,000.
 d)
              The
                  outstanding recourse debt within the investment properties was
                  comprised
                  of a loan borrowed to finance the acquisition of our properties
                  Village
                  Lake and Coachman's in January 2003, as well as a two-year, $3,000,000
                  recourse note that the Company obtained in June 2005.  Both of these
                  loans were repaid in full in January
                  2007.
 e)
              The
                  general recourse debt outstanding as of June 30, 2007, is made
                  up of
                  various capital leases outstanding within our U.S. and Puerto Rico
                  operations, as well as installment loans for vehicles and other
                  miscellaneous equipment.
 f)
              In
                  2005, the Company purchased 22 residential acres adjacent to the
                  Sheffield
                  Neighborhood for $1,000,000.  The Company funded half of the
                  purchase price with cash and signed a two-year note for $500,000
                  due in
                  November 2007.  The Company plans to annex the land into the St.
                  Charles master plan community.
 g)
              The
                  non-recourse debt related to the investment properties is collateralized
                  by the multifamily rental properties and the office building in
                  Parque
                  Escorial.  As of June 30, 2007, approximately $73,558,000 of
                  this debt is secured by the Federal Housing Administration ("FHA")
                  or the
                  Maryland Housing Fund.  The non-recourse debt related to the
                  investment properties also includes a construction loan for Sheffield
                  Greens Apartments LLC (Sheffield Greens).  As of June 30, 2007,
                  the balance of the construction loan was $25,390,000.  The
                  construction loan will convert to a 40-year non-recourse permanent
                  mortgage not later than September of
                  2007.
 
 The
        Company’s loans contain various
        financial, cross collateral, cross default, technical and restrictive
        provisions.  As of June 30, 2007, the Company is in compliance with
        the financial covenants and the other provisions of its loan
        agreements.
 
 **(5)**
              **COMMITMENTS
                  AND CONTINGENT LIABILITIES**
 
 *Financial
        Commitments*
 Pursuant
        to an agreement reached between ACPT and the Charles County Commissioners
        in
        2002, the Company agreed to accelerate the construction of two major roadway
 ***-
            14 -***
 ***Table
            of Contents***
  links
        to
        the Charles County (the "County") road system. As part of the agreement,
        the
        County agreed to issue general obligation public improvement bonds (the “Bonds”)
        to finance $20,000,000 of this construction guaranteed by letters of credit
        provided by Lennar as part of a residential lot sales contract for 1,950
        lots in
        Fairway Village.  The Bonds were issued in three installments with the
        final $6,000,000 installment issued in March 2006.  The Bonds bear interest
        rates ranging from 4% to 8%, for a blended lifetime rate for total Bonds
        issued
        to date of 5.1%, and call for semi-annual interest payments and annual principal
        payments and mature in fifteen years.  Under the terms of Bond
        repayment agreements between the Company and the County, the Company is
        obligated to pay interest and principal to the County based on the full amount
        of the Bonds; as such, the Company recorded the full amount of the debt and
        a
        receivable from the County representing the remaining Bond proceeds to be
        advanced to the Company as major infrastructure development within the project
        occurs.  As part of the agreement, the Company will pay the County a
        monthly payment equal to one-sixth of the semi-annual interest payments and
        one-twelfth of the annual principal payment. The County will also require
        ACPT
        to fund an escrow account from lot sales that will be used to repay these
        Bonds.
 In
        August
        2005, the Company signed a memorandum of understanding ("MOU") with the Charles
        County Commissioners regarding a land donation that is anticipated to house
        a
        planned minor league baseball stadium and entertainment complex. Under the
        terms
        of the MOU, the Company donated 42 acres of land in St. Charles to the County
        on
        December 31, 2005. The Company also agreed to expedite off-site utilities,
        storm-water management and road construction improvements that will serve
        the
        entertainment complex and future portions of St. Charles so that the
        improvements will be completed concurrently with the entertainment
        complex.  In return, the County agreed to issue $7,000,000 of general
        obligation bonds to finance the infrastructure improvements.  In March
        2006, the County issued $4,000,000 of bonds for this project and in March
        2007,
        the County issued an additional $3,000,000.  The funds for this
        project will be repaid by ACPT over a 15-year period. In addition, the County
        agreed to issue an additional 100 school allocations a year to St. Charles
        commencing with the issuance of bonds.
 During
        2006, the Company reached an agreement with Charles County whereby the Company
        receives interest payments on any undistributed bond proceeds held in escrow
        by
        the County.  The agreement covers the period from July 1, 2005 through
        the last draw made by the Company.  For the six and three months ended
        June 30, 2007, the Company recognized $299,000 and $147,000 of interest income
        on these escrowed funds.
 **As
        of June 30, 2007,
        ACPT is guarantor of $22,845,000 of surety bonds for the completion of land
        development projects with Charles County; substantially all are for the benefit
        of the Charles County Commissioners.
 
 *Consulting
        Agreement and Arrangement*
 ACPT
        entered into a consulting and
        retirement compensation agreement with Interstate General Company L.P.’s (“IGC”)
        founder and Chief Executive Officer, James J. Wilson, effective October 5,
        1998
        (the "Consulting Agreement").  IGC was the predecessor company to
        ACPT.  Under the terms of the Consulting Agreement, the Company will
        pay Mr. Wilson $200,000 per year through October 2008.
 
 *Guarantees*
 ACPT
        and
        its subsidiaries typically provide guarantees for another subsidiary's loans.
        In
        many cases more than one company guarantees the same debt. Since all of these
        companies are consolidated, the debt or other financial commitment made by
        the
        subsidiaries to third parties and guaranteed by ACPT, is included within
        ACPT's
        consolidated financial statements.  As of June 30, 2007, ACPT has
        guaranteed $24,455,000 of outstanding debt owed by its
        subsidiaries.  IGP has guaranteed $1,800,000 of its subsidiaries'
        outstanding debt.  The guarantees will remain in effect until the debt
        service is fully repaid by the respective borrowing subsidiary.  The
        terms of the debt service guarantees outstanding range from one to nine
        years.  In addition to debt service guarantees, both the Company and
        Lennar provided development completion guarantees related to the St. Charles
        Active Adult Community Joint Venture.  We do not expect any of these
        guarantees to impair the individual subsidiary or the Company's ability to
        conduct business or to pursue its future development plans.
 
 *Legal
        Matters*
 There
        have been no other material changes to the legal proceedings previously
        disclosed in our Annual Report on Form 10-K for the year ended December 31,
        2006.
 The
        Company and/or its subsidiaries have been named as defendants, along with
        other
        companies, in tenant-related lawsuits. The Company carries liability insurance
        against certain types of claims that management believes meets industry
        standards.  To date, payments made to the plaintiffs of the settled
        cases were covered by our insurance policy.  The Company believes it has
        strong defenses to the pending unresolved claims, and intends to continue
        to
        defend itself vigorously in these matters.
 In
        the
        normal course of business, ACPT is involved in various pending or unasserted
        claims. In the opinion of management, these are not expected to have a material
        impact on the financial condition or future operations of ACPT.
 
 **(6)**
              **RELATED
                  PARTY TRANSACTIONS**
 
 Certain
        officers and trustees of ACPT
        have ownership interests in various entities that conduct business with the
        Company.  The financial impact of the related party transactions on
        the accompanying consolidated financial statements is reflected below (in
        thousands):
  ***-
            15 -***
 ***Table
            of Contents***
  **CONSOLIDATED
                    STATEMENT OF INCOME:**Six
                    Months Ended
                
                
                Three
                    Months EndedJune
                    30,
                
                
                June
                    30,**2007**
                
                
                2006
                
                
                **2007**
                
                
                2006**Management
                    and Other Fees (A)**Unconsolidated
                    subsidiaries with third party partners
                
                
                
                **$**
                **21**
                
                
                $
                19
                
                
                **$**
                **11**
                
                
                $
                9Affiliates
                    of J. Michael Wilson, CEO and Chairman
                
                
                
                ****
                **43**
                
                
                
                248
                
                
                ****
                **-**
                
                
                
                117**$**
                **64**
                
                
                $
                267
                
                
                **$**
                **11**
                
                
                $
                126**Rental
                    Property Revenues**
                (B)
                
                
                **$**
                **28**
                
                
                $
                -
                
                
                **$**
                **14**
                
                
                $
                -**Interest
                    and Other Income**Unconsolidated
                    real estate entities with third party partners
                
                
                
                **$**
                **4**
                
                
                $
                2
                
                
                **$**
                **2**
                
                
                $
                2**General
                    and Administrative Expense**Affiliates
                    of J. Michael Wilson, CEO and Chairman
                (C1)
                
                
                **$**
                **-**
                
                
                $
                19
                
                
                **$**
                **-**
                
                
                $
                -Reserve
                    additions and other write-offs-Unconsolidated
                    real estate entities with third party partners
                (A)
                
                
                ****
                **11**
                
                
                
                5
                
                
                ****
                **7**
                
                
                
                (1
                )Reimbursement
                    to IBC for ACPT's share of J. Michael Wilson's salary
                
                
                ****
                **195**
                
                
                
                188
                
                
                ****
                **97**
                
                
                
                94Reimbursement
                    of administrative costs-Affiliates
                    of J. Michael Wilson, CEO and Chairman
                
                
                
                ****
                **(13**
                **)**
                
                
                (5
                )
                
                ****
                **(7**
                **)**
                
                
                (2
                )Reimbursement
                    of legal fees to attorney for J. Michael Wilson
                (C4)
                
                
                ****
                **48**
                
                
                
                -
                
                
                ****
                **48**
                
                
                
                -Consulting
                    Fees -James
                    J. Wilson, IGC Chairman and Director
                (C2)
                
                
                ****
                **100**
                
                
                
                100
                
                
                ****
                **50**
                
                
                
                50Thomas
                    J. Shafer, Trustee
                (C3)
                
                
                ****
                **30**
                
                
                
                30
                
                
                ****
                **15**
                
                
                
                15**$**
                **371**
                
                
                $
                337
                
                
                **$**
                **210**
                
                
                $
                156**BALANCE
                    SHEET:**
                
                
                
                
                
                
                
                
                
                
                
                **Balance**
                
                
                Balance**June
                    30,**
                
                
                December
                    31,**2007**
                
                
                2006**Other
                    Assets**Receivables
                    - All unsecured and due on demandAffiliate
                    of J. Michael Wilson, CEO and Chairman
                
                
                
                
                
                
                
                
                
                
                
                **$**
                **10**
                
                
                $
                128
 (A)           **Management
        and Other Services**
 The
        Company provides management and other support services to its unconsolidated
        subsidiaries and other affiliated entities in the normal course of
        business.  The fees earned from these services are typically collected
        on a monthly basis, one month in arrears.  Receivables are unsecured
        and due on demand.  Certain partnerships experiencing cash shortfalls
        have not paid timely.  Generally, receivable balances of these
        partnerships are fully reserved, until satisfied or the prospect of
        collectibility improves. The collectibility of management fee receivables
        is
        evaluated quarterly.  Any increase or decrease in the reserves is
        reflected accordingly as additional bad debt expenses or recovery of such
        expenses.
 Chastleton
        Associates, LP, previously owned by an affiliate of J. Michael Wilson, was
        sold
        to a third party during April 2007, resulting in a termination of our management
        agreement.  The Company earned an agreed-upon management fee for
        administrative services through the end of the second quarter
        2006.  Management fees generated by this property accounted for less
        than 1% of the Company’s total revenue.
 At
        the
        end of February 2007, G.L. Limited Partnership, which was owned by affiliates
        of
        J. Michael Wilson, was sold to a third party.  Accordingly, we are no
        longer the management agent for this property effective March 1,
        2007.  Management fees generated by this property accounted for less
        than 1% of the Company’s total revenue.
  ***-
            16 -***
  (B)           **Rental
        Property Revenue**
 On
        September 1, 2006, the Company, through one of its Puerto Rican subsidiaries,
        Escorial Office Building I, Inc. (“Landlord”), executed a lease with Caribe
        Waste Technologies, Inc. (“CWT”), a company owned by the J. Michael Wilson
        Family.  The lease provides for 1,842 square feet of office space to
        be leased by CWT for five years at $19.00 per rentable square
        foot.  The company provided CWT with an allowance of $9,000 in tenant
        improvements which are being amortized over the life of the lease.  In
        addition, CWT shall have the right to terminate this lease at any time after
        one
        year, provided it gives Landlord written notice six (6) months prior to
        termination.   The lease agreement is unconditionally guaranteed
        by Interstate Business Corporation (“IBC”), a company owned by the J. Michael
        Wilson Family.
 (C)           **Other**
 Other
        transactions with related parties
        are as follows:
 1)
              In
                  2005, the Company rented executive office space and other property
                  from an
                  affiliate in the United States pursuant to leases that were assigned
                  to
                  the new owners when the property was sold in January 2006.  In
                  management’s opinion, all leases with affiliated persons were on terms at
                  least as favorable as these generally available from unaffiliated
                  persons
                  for comparable property.
 2)
              Represents
                  fees paid to James J. Wilson pursuant to a consulting and retirement
                  agreement.  At Mr. Wilson's request, payments are made to
                  IWT.
 3)
              Represents
                  fees paid to Thomas J. Shafer, a trustee, pursuant to a consulting
                  agreement.
 4)
              The
                Independent Trustees concluded that certain legal fees and expenses
                incurred by J. Michael Wilson in connection with the preliminary
                work
                being done in seeking a strategic partner to recapitalize the company
                are
                in the best interest of the Company and the minority shareholders. 
                Accordingly, the Independent Trustees authorized the Company to fund
                up to
                $170,000 of such costs, $48,000 of which had been incurred as of
                June 30,
                2007.
 
 **Related
        Party Acquisitions**
 
 *El
        Monte*
 On
        April
        30, 2004, the Company purchased a 50% limited partnership interest in El
        Monte
        Properties S.E. ("El Monte") from Insular Properties Limited Partnership
        ("Insular") for $1,462,500.  Insular is owned by the J. Michael Wilson
        Family.  Per the terms of the agreement, the Company was responsible
        to fund $400,000 of capital improvements and lease stabilization costs, and
        had
        a priority on cash distributions up to its advances plus accrued interest
        at 8%,
        investment and a 13% cumulative preferred return on its
        investment.  The purchase price was based on a third party appraisal
        of $16,500,000 dated April 22, 2003. The Company's limited partnership
        investment was accounted for under the equity method of accounting.
 In
        December 2004, a third party buyer purchased El Monte for
        $20,000,000:  $17,000,000 in cash and $3,000,000 in two notes of
        $1,500,000 each that bear an interest rate of prime plus 2%, with a ceiling
        of
        9%, and mature on December 3, 2009.  The net cash proceeds from the
        sale of the real estate were distributed to the partners.  As a
        result, the Company received $2,500,000 in cash and recognized $986,000 of
        income in 2004.  El Monte distributed a $1,500,000 note to the Company
        in January 2005.  On January 24, 2007, the Company received $1,707,000
        as payment in full of the principal balance and all accrued interest related
        to
        the El Monte note receivable.  Accordingly, the Company recorded
        $1,500,000 as equity in earnings and $207,000 as interest income.  As
        previously noted, the Company deferred revenue recognition on this note until
        the cash was received.
 
 **(7)**
              **INCOME
                  TAXES**
 
 We
        adopted the provisions of FIN 48 on January 1, 2007.  As a result of
        the implementation of FIN 48, we recorded a $1,458,000 increase in the net
        liability for unrecognized tax positions, which was recorded as a cumulative
        effect of a change in accounting principle, reducing the opening balance
        of
        retained earnings on January 1, 2007.  The total amount of
        unrecognized tax benefits as of January 1, 2007, was
        $13,544,000.  Included in the balance at January 1, 2007, were
        $2,605,000 of tax positions that, if recognized, would impact the effective
        tax
        rate.
 In
        accordance with our accounting policy, we recognize accrued interest related
        to
        unrecognized tax benefits as a component of interest expense and penalties
        as a
        component of tax expense on the Consolidated Statements of
        Income.  This policy did not change as a result of the adoption of FIN
        48.  Our Consolidated Statements of Income for the six and three
        months ended June 30, 2007, and our Consolidated Balance Sheet as of that
        date
        included interest of $551,000,  $282,000 and $2,181,000, respectively
        and penalties of $72,000, $14,000 and $669,000, respectively.
 The
        Company currently does not have any tax returns under audit by the United
        States
        Internal Revenue Service or the Puerto Rico Treasury
        Department.  However, the tax returns filed in the Unites States for
        the years ended December 31, 2003 through 2006 remain subject to
        examination.  For Puerto Rico, the tax returns for the years ended
        December 31, 2002 through 2006 remain subject to examination.  Within
        the next twelve months, the Company anticipates the payment of $252,000 related
        to a closing agreement being pursued with the Puerto Rico Treasury
        Department.  The Company does not anticipate any other payments
        related to settlement of any tax examinations.  Additionally, as
        certain United States and Puerto Rico income tax returns will no longer be
        subject to examination, and as a result, there is a reasonable possibility
        that
        the amount of unrecognized tax benefits will decrease by $26,000 when the
        related statutes of limitations expire.
  ***-
            17 -***
 ***Table
            of Contents***
  
 **(8)**
              **SEGMENT
                  INFORMATION**
 
 ACPT
        has
        two reportable segments: U.S. operations and Puerto Rico operations. The
        Company's chief decision-makers allocate resources and evaluate the Company's
        performance based on these two segments. The U.S. segment is comprised of
        different components grouped by product type or service, to
        include:  investments in rental properties, community development and
        property management services. The Puerto Rico segment entails the following
        components: investment in rental properties, community development, homebuilding
        and property management services.  The U.S. segment bears
        substantially all of the corporate costs associated with being a public company
        and other corporate governance.  The accounting policies of the
        segments are the same as those described in the summary of significant
        accounting policies.
 
 *Customer
        Dependence*
 Residential
        land sales to Lennar within our U.S. segment were $3,309,000 for the six
        months
        ended June 30, 2007, which represents 13% of the U.S. segment's revenue and
        8%
        of our total year-to-date consolidated revenue.  No customers
        accounted for more than 10% of our consolidated revenue for the six months
        ended
        June 30, 2007.
 
 
  ***-
            18 -***
 ***Table
            of Contents***
  The
        following presents the segment information for the six months ended June
        30,
        2007 and 2006 (in thousands):
 United
                
                Puerto
                
                Inter-States
                
                Rico
                
                Segment
                
                Total**Six
                    Months Ended June 30, 2007 (Unaudited):**
                $
                
                $
                
                $
                
                $Rental
                    property revenues
                
                18,706
                
                
                11,126
                
                
                -
                
                
                29,832Rental
                    property operating expenses
                
                9,489
                
                
                5,638
                
                
                (13
                )
                
                15,114Land
                    sales revenue
                
                5,969
                
                
                -
                
                
                -
                
                
                5,969Cost
                    of land sales
                
                4,356
                
                
                -
                
                
                -
                
                
                4,356Home
                    sales revenue
                
                -
                
                
                5,214
                
                
                -
                
                
                5,214Cost
                    of home sales
                
                -
                
                
                3,816
                
                
                -
                
                
                3,816Management
                    and other fees
                
                208
                
                
                313
                
                
                (15
                )
                
                506General,
                    administrative, selling and marketing expense
                
                3,923
                
                
                1,448
                
                
                (3
                )
                
                5,368Depreciation
                    and amortization
                
                2,745
                
                
                1,836
                
                
                -
                
                
                4,581Operating
                    income
                
                4,370
                
                
                3,915
                
                
                1
                
                
                8,286Interest
                    income
                
                591
                
                
                226
                
                
                (55
                )
                
                762Equity
                    in earnings from unconsolidated entities
                
                (1
                )
                
                1,846
                
                
                -
                
                
                1,845Interest
                    expense
                
                6,226
                
                
                3,166
                
                
                (55
                )
                
                9,337Minority
                    interest in consolidated entities
                
                173
                
                
                1,384
                
                
                -
                
                
                1,557Income
                    before provision/(benefit) for income taxes
                
                (1,436
                )
                
                1,563
                
                
                -
                
                
                127Income
                    tax provision/(benefit)
                
                (481
                )
                
                769
                
                
                -
                
                
                288**Net
                    income**
                ****
                **(955**
                **)**
                ****
                **794**
                
                ****
                **-**
                
                ****
                **(161**
                **)**Gross
                    profit on land sale
                
                1,613
                
                
                -
                
                
                -
                
                
                1,613Gross
                    profit on home sales
                
                -
                
                
                1,398
                
                
                -
                
                
                1,398**Total
                    assets**
                ****
                **254,637**
                
                ****
                **102,060**
                
                ****
                **(1,620**
                **)**
                ****
                **355,077**Additions
                    to long lived assets
                
                4,519
                
                
                422
                
                
                -
                
                
                4,941**Six
                    Months Ended June 30, 2006 (Unaudited):**
                
                $
                
                
                $
                
                
                $
                
                
                $Rental
                    property revenues
                
                15,606
                
                
                10,532
                
                
                -
                
                
                26,138Rental
                    property operating expenses
                
                7,373
                
                
                5,443
                
                
                -
                
                
                12,816Land
                    sales revenue
                
                6,626
                
                
                -
                
                
                -
                
                
                6,626Cost
                    of land sales
                
                3,666
                
                
                -
                
                
                -
                
                
                3,666Home
                    sales revenue
                
                -
                
                
                11,259
                
                
                -
                
                
                11,259Cost
                    of home sales
                
                -
                
                
                8,521
                
                
                -
                
                
                8,521Management
                    and other fees
                
                269
                
                
                296
                
                
                -
                
                
                565General,
                    administrative, selling and marketing expense
                
                3,178
                
                
                1,356
                
                
                -
                
                
                4,534Depreciation
                    and amortization
                
                2,275
                
                
                1,799
                
                
                -
                
                
                4,074Operating
                    income
                
                6,009
                
                
                4,968
                
                
                -
                
                
                10,977Interest
                    income
                
                59
                
                
                60
                
                
                (18
                )
                
                101Equity
                    in earnings from unconsolidated entities
                
                -
                
                
                343
                
                
                -
                
                
                343Interest
                    expense
                
                4,048
                
                
                3,170
                
                
                (18
                )
                
                7,200Minority
                    interest in consolidated entities
                
                312
                
                
                2,354
                
                
                -
                
                
                2,666Income
                    before provision/(benefit) for income taxes
                
                1,710
                
                
                (38
                )
                
                -
                
                
                1,672Income
                    tax provision/(benefit)
                
                729
                
                
                (15
                )
                
                -
                
                
                714**Net
                    income**
                ****
                **981**
                
                ****
                **(23**
                **)**
                ****
                **-**
                
                ****
                **958**Gross
                    profit on land sale
                
                2,960
                
                
                -
                
                
                -
                
                
                2,960Gross
                    profit on home sales
                
                -
                
                
                2,738
                
                
                -
                
                
                2,738**Total
                    assets**
                ****
                **208,106**
                
                ****
                **109,767**
                
                ****
                **(369**
                **)**
                ****
                **317,504**Additions
                    to long lived assets
                
                24,208
                
                
                908
                
                
                -
                
                
                25,116
 ***-
            19 -***
 ***Table
            of Contents***
  The
        following presents the segment information for the three months ended June
        30,
        2007 and 2006 (in thousands):
 
 United
              
              Puerto
              
              Inter-States
              
              Rico
              
              Segment
              
              Total**Three
                  Months Ended June 30, 2007 (Unaudited):**
              $
              
              $
              
              $
              
              $Rental
                  property revenues
              
              9,801
              
              
              5,621
              
              
              -
              
              
              15,422Rental
                  property operating expenses
              
              4,864
              
              
              2,907
              
              
              (13
              )
              
              7,758Land
                  sales revenue
              
              2,214
              
              
              -
              
              
              -
              
              
              2,214Cost
                  of land sales
              
              1,440
              
              
              -
              
              
              -
              
              
              1,440Home
                  sales revenue
              
              -
              
              
              2,126
              
              
              -
              
              
              2,126Cost
                  of home sales
              
              -
              
              
              1,530
              
              
              -
              
              
              1,530Management
                  and other fees
              
              98
              
              
              160
              
              
              (15
              )
              
              243General,
                  administrative, selling and marketing expense
              
              2,176
              
              
              732
              
              
              (3
              )
              
              2,905Depreciation
                  and amortization
              
              1,474
              
              
              923
              
              
              -
              
              
              2,397Operating
                  income
              
              2,159
              
              
              1,815
              
              
              1
              
              
              3,975Interest
                  income
              
              294
              
              
              11
              
              
              (25
              )
              
              280Equity
                  in earnings from unconsolidated entities
              
              (1
              )
              
              173
              
              
              -
              
              
              172Interest
                  expense
              
              3,160
              
              
              1,585
              
              
              (25
              )
              
              4,720Minority
                  interest in consolidated entities
              
              173
              
              
              12
              
              
              -
              
              
              185Income
                  before provision/(benefit) for income taxes
              
              (879
              )
              
              459
              
              
              -
              
              
              (420
              )Income
                  tax provision/(benefit)
              
              (406
              )
              
              171
              
              
              -
              
              
              (235
              )**Net
                  income**
              ****
              **(473**
              **)**
              ****
              **288**
              
              ****
              **-**
              
              ****
              **(185**
              **)**Gross
                  profit on land sale
              
              774
              
              
              -
              
              
              -
              
              
              774Gross
                  profit on home sales
              
              -
              
              
              596
              
              
              -
              
              
              596**Total
                  assets**
              ****
              **254,637**
              
              ****
              **102,060**
              
              ****
              **(1,620**
              **)**
              ****
              **355,077**Additions
                  to long lived assets
              
              1,693
              
              
              195
              
              
              -
              
              
              1,888**Three
                  Months Ended June 30, 2006 (Unaudited):**Rental
                  property revenues
              
              8,059
              
              
              5,288
              
              
              -
              
              
              13,347Rental
                  property operating expenses
              
              3,834
              
              
              2,794
              
              
              -
              
              
              6,628Land
                  sales revenue
              
              2,682
              
              
              -
              
              
              -
              
              
              2,682Cost
                  of land sales
              
              1,440
              
              
              (10
              )
              
              -
              
              
              1,430Home
                  sales revenue
              
              -
              
              
              7,234
              
              
              -
              
              
              7,234Cost
                  of home sales
              
              -
              
              
              5,487
              
              
              -
              
              
              5,487Management
                  and other fees
              
              128
              
              
              147
              
              
              -
              
              
              275General,
                  administrative, selling and marketing expense
              
              1,496
              
              
              606
              
              
              -
              
              
              2,102Depreciation
                  and amortization
              
              1,199
              
              
              902
              
              
              -
              
              
              2,101Operating
                  income
              
              2,900
              
              
              2,890
              
              
              -
              
              
              5,790Interest
                  income
              
              34
              
              
              15
              
              
              (18
              )
              
              31Equity
                  in earnings from unconsolidated entities
              
              -
              
              
              173
              
              
              -
              
              
              173Interest
                  expense
              
              2,115
              
              
              1,602
              
              
              (18
              )
              
              3,699Minority
                  interest in consolidated entities
              
              304
              
              
              1,297
              
              
              -
              
              
              1,601Income
                  before provision/(benefit) for income taxes
              
              515
              
              
              237
              
              
              -
              
              
              752Income
                  tax provision/(benefit)
              
              228
              
              
              67
              
              
              -
              
              
              295**Net
                  income**
              ****
              **287**
              
              ****
              **170**
              
              ****
              **-**
              
              ****
              **457**Gross
                  profit on land sale
              
              1,242
              
              
              10
              
              
              -
              
              
              1,252Gross
                  profit on home sales
              
              -
              
              
              1,747
              
              
              -
              
              
              1,747**Total
                  assets**
              ****
              **208,106**
              
              ****
              **109,767**
              
              ****
              **(369**
              **)**
              ****
              **317,504**Additions
                  to long lived assets
              
              20,228
              
              
              842
              
              
              -
              
              
              21,070
 
  ***-
            20 -***
 ***Table
            of Contents***
  
 **(9)**
              **SUBSEQUENT
                  EVENTS**
 
 *Cash
        Dividend*
 On
        August
        13, 2007, the Board of Trustees declared a $0.10 per share cash dividend
        on its
        common shares, payable on September 12, 2007, to shareholders of record as
        of
        August 28, 2007.
 
 **ITEM
                  2.**
              **MANAGEMENT'S
                  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                  OPERATIONS**
 
 **FORWARD-LOOKING
        STATEMENTS**
 The
        following discussion should be read in conjunction with the consolidated
        financial statements and notes thereto appearing in this report. Historical
        results set forth in Management's Discussion and Analysis of Financial Condition
        and Results of Operation and the Financial Statements should not be taken
        as
        indicative of our future operations.
 This
        quarterly report on Form 10-Q
        contains forward-looking statements within the meaning of the Private Securities
        Litigation Reform Act of 1995. These include statements about our business
        outlook, market and economic conditions, strategies, future plans, anticipated
        costs and expenses, capital spending, and any other statements that are not
        historical. The accuracy of these statements is subject to a number of risks,
        uncertainties, and other factors that may cause our actual results, performance
        or achievements of the Company to differ materially from any future results,
        performance or achievements expressed or implied by such forward-looking
        statements.   Those items are discussed under "Risk Factors" in
        Part I, Item 1A to the Form 10-K for the year ended December 31,
        2006.
 
 **NEW
        ACCOUNTING PRONOUNCEMENTS AND CHANGE IN BASIS OF
        PRESENTATION**
 In
        July
        2006, the FASB issued FASB Interpretation No. 48, “*Accounting for
        Uncertainty in Income Taxes*” (“FIN 48”). FIN 48 is an interpretation of
        FASB Statement No. 109, “*Accounting for Income Taxes*,” and it
        seeks to reduce the diversity in practice associated with certain aspects
        of
        measurement and recognition in accounting for income taxes. In addition,
        FIN 48
        requires expanded disclosure with respect to the uncertainty in income
        taxes.  We adopted the provisions of FIN 48 on January 1,
        2007.  As a result of the implementation of FIN 48, we recorded a
        $1,458,000 increase in the net liability for unrecognized tax positions,
        which
        was recorded as a cumulative effect of a change in accounting principle,
        reducing the opening balance of retained earnings on January 1,
        2007.  See Note 7 to the consolidated financial statements for further
        discussion.
 
 **CRITICAL
        ACCOUNTING POLICIES**
 The
        preparation of financial statements
        in conformity with accounting principles generally accepted in the United
        States, which we refer to as GAAP, requires management to use judgment in
        the
        application of accounting policies, including making estimates and assumptions.
        These judgments affect the reported amounts of assets and liabilities and
        disclosure of contingent assets and liabilities at the dates of the financial
        statements and the reported amounts of revenue and expenses during the reporting
        periods. If our judgment or interpretation of the facts and circumstances
        relating to various transactions had been different, it is possible that
        different accounting policies would have been applied resulting in a different
        presentation of our financial statements.
 Refer
        to
        the Company’s 2006 Annual Report on Form 10-K for a discussion of critical
        accounting policies, which include sales, profit recognition and cost
        capitalization, investment in unconsolidated real estate entities, impairment
        of
        long-lived assets, depreciation of investments in real estate, income taxes
        and
        contingencies.  For the six months ended June 30, 2007, there were no
        material changes to our policies except as noted above related to the
        implementation of FIN 48.
 
 **RESULTS
        OF OPERATIONS**
 The
        following discussion is based on the consolidated financial statements of
        the
        Company. It compares the results of operations of the Company for the six
        and
        three months ended June 30, 2007 (unaudited), with the results of operations
        of
        the Company for the six and three months ended June 30, 2006
        (unaudited).  Historically, the Company’s financial results have been
        significantly affected by the cyclical nature of the real estate
        industry.  Accordingly, the Company’s historical financial statements
        may not be indicative of future results. This discussion should be read in
        conjunction with the accompanying consolidated financial statements and notes
        included elsewhere in this report and within our Annual Report on Form 10-K
        for
        the year ended December 31, 2006.
 
 **Results
        of Operations - U.S. Operations:**
 For
        the
        six- and three-month periods ended June 30, 2007, our U.S. segment generated
        $4,370,000 and $2,159,000 of operating income compared to $6,009,000 and
        $2,900,000 of operating income generated by the segment for the same periods
        in
        2006, respectively. Additional information and analysis of the U.S. operations
        can be found below.
  ***-
            21 -***
 ***Table
            of Contents***
  **Rental
        Property Revenues and Operating Expenses - U.S.
        Operations:**
 As
        of
        June 30, 2007, nineteen U.S.-based apartment properties in which we hold
        an
        ownership interest qualified for the consolidation method of
        accounting.  The rules of consolidation require that we include within
        our financial statements the consolidated apartment properties' total revenue
        and operating expenses. The portions of net income attributable to the interests
        of the outside owners of these properties and any losses and distributions
        in
        excess of the minority owners’ basis in those properties are reflected as
        minority interest expense.
 As
        of
        June 30, 2007, thirteen of the consolidated properties were market rent
        properties, allowing us to determine the appropriate rental
        rates.  Even though we can determine the rents, a portion of our units
        at some of our market rent properties must be leased to tenants with low
        to
        moderate income. HUD subsidizes four of the properties and the two remaining
        properties are a mix of subsidized units and market rent units. HUD dictates
        the
        rents of the subsidized units.
 
 *Apartment
        Construction and Acquisitions*
 On
        January 31, 2007, we completed the newest addition to our rental apartment
        portfolio located in St. Charles' Fairway Village, the Sheffield Greens
        Apartments.  The 252-unit apartment project consists of nine, 3-story
        buildings and offers 1 and 2 bedroom units ranging in size from 800 to 1,400
        square feet.  Leasing efforts continue to be successful, with 98% of
        the total complex leased as of June 30, 2007.
 On
        April
        28, 2006, the Company acquired two apartment properties, Milford Station
        I LLC
        and Milford Station II LLC, in Baltimore, Maryland containing a combined
        total
        of 250 units for approximately $14,300,000.  All of the acquired
        properties are operated as market rate properties.
 
 *Six
        months ended*
 For
        the
        six months ended June 30, 2007, rental property revenues increased $3,100,000
        or
        20% to $18,706,000 compared to $15,606,000 for the same period in
        2006.  The increase in rental revenues was primarily the result of
        additional revenues for Sheffield Greens Apartments, Milford Station I and
        Milford Station II which accounted for approximately $2,335,000 of the
        difference.  The increase was also attributable to an overall 5%
        increase in rents between periods.  These rental revenue increases
        were offset in part by an increase in our vacancy rate, primarily resulting
        from
        the supply of new units to the area upon completion of the Sheffield Greens
        Apartments.  As Sheffield became fully occupied in the 2nd quarter,
        we have
        seen increased absorption of vacant units at our other competing
        properties.
 Rental
        property operating expenses increased $2,116,000 or 29% for the second quarter
        of 2007 to $9,489,000 compared to $7,373,000 for the second quarter of
        2006.  The overall increase in rental property operating expenses was
        primarily the result of additional expenses for Sheffield Greens Apartments,
        Milford Station I and Milford Station II, which accounted for approximately
        $1,236,000 of the difference.  The remainder of the increase resulted
        from overall inflationary adjustments as well as specific increases in
        advertising, security, office and maintenance salaries, utilities,
        rehabilitation and concessions awarded to residents.  We are currently
        working to reduce our overall operating expenses.  Specific reduction
        efforts include reducing advertising and concessions expenses now that Sheffield
        Greens is leased and occupancy rates at other competing properties are
        increasing.  We are also pursuing measures to reduce security
        expenditures.
 
 *Three
        months ended*
 For
        the
        three months ended June 30, 2007, rental property revenues increased $1,742,000
        or 22% to $9,801,000 compared to $8,059,000 for the same period in
        2006.  The increase in rental revenues was primarily the result of
        additional revenues for Sheffield Greens Apartments, Milford Station I and
        Milford Station II which accounted for approximately $1,287,000 of the
        difference.  The increase was also attributable to an overall 5%
        increase in rents between periods.  These rental revenue increases
        were offset in part by an increase in our vacancy rate in the US, primarily
        resulting from the supply of new units to the area upon completion of the
        Sheffield Greens Apartments.  As Sheffield became fully occupied in
        the 2nd
        quarter, we have seen increased absorption of vacant units at our other
        competing properties.
 Rental
        property operating expenses increased $1,030,000 or 27% for the second quarter
        of 2007 to $4,864,000 compared to $3,834,000 for the second quarter of
        2006.  The overall increase in rental property operating expenses was
        primarily the result of additional expenses for Sheffield Greens Apartments,
        Milford Station I and Milford Station II, which accounted for approximately
        $628,000 of the difference.  The remainder of the increase resulted
        from overall inflationary adjustments as well as specific increases in
        advertising, security, office and maintenance salaries, rehabilitation and
        concessions awarded to residents.  We are currently working to reduce
        our overall operating expenses.  Specific reduction efforts include
        reducing advertising and concessions expenses now that Sheffield greens is
        leased and occupancy rates at other competing properties are
        increasing.  We are also pursuing measures to reduce security
        expenditures.
 
 **Community
        Development – U.S. Operations:**
 Land
        sales revenue in any one period is affected by the mix of lot sizes and,
        to a
        greater extent, the mix between residential and commercial sales. In March
        2004,
        the Company executed an agreement with Lennar Corporation to sell 1,950
        residential lots (1,359 single family lots and 591 town home lots) in Fairway
        Village in St. Charles, Maryland. The agreement requires the homebuilder
        to
        provide $20,000,000 in letters of credit to secure the purchase of the lots
        and
        purchase 200 residential lots per year, provided that they are developed
        and
        available for delivery as defined by the development agreement. Based on
        200 lot
        sales per year,
  ***-
            22 -***
 ***Table
            of Contents***
  it
        is
        estimated that lot settlements will take place through 2015. Sales are closed
        on
        a lot by lot basis at the time when the builder purchases the lot. The ultimate
        selling price per lot sold to Lennar may exceed the amount recognized at
        closing
        since the final lot price is equal to 30% of the base price of the home sold
        on
        the lot. Additional revenue exceeding the established take down price per
        lot
        will be recognized upon Lennar’s settlement with the respective homebuyers.
        Residential lots can vary in size and location resulting in pricing differences.
        Gross margins of residential lots are fairly consistent within any given
        village
        in St. Charles. Commercial land is typically sold by contract that allows
        for a
        study period and delayed settlement until the purchaser obtains the
 necessary
        permits for development. The sales prices and gross margins for commercial
        parcels vary significantly depending on the location, size, extent of
        development and ultimate use. Commercial land sales are generally
        cyclical.
 Community
        development land sales revenue decreased $657,000 or 10% for the six months
        ended June 30, 2007, to $5,969,000 as compared to $6,626,000 for the six
        months
        ended June 30, 2006.  The overall decrease was primarily the result of
        a decrease in the number of residential lots settled during the first six
        months
        of 2007, offset in part by an increase in the amount of commercial sales
        for the
        period.
 Community
        development land sales revenue decreased $468,000 or 17% for the three months
        ended June 30, 2007, to $2,214,000 as compared to $2,682,000 for the three
        months ended June 30, 2006.  The overall decrease for the three months
        ended June 30, 2007 as compared to the three months ended June 30, 2006 resulted
        from decreased commercial sales and decreased true-up payments received,
        offset
        in part by an increase in the number of residential lots delivered. Further
        discussion of the components of this variance is as follows:
 
 *Residential
        Land Sales*
 For
        the
        six months ended June 30, 2007, we recognized $1,579,000 related to the delivery
        of 17 residential lots to Lennar, of which 14 were townhome lots and 3 were
        single-family lots, as compared to $3,317,000 related to 26 single-family
        lots
        delivered in the six months ended June 30, 2006.  For the six months
        ended June 30, 2007, we delivered 14 townhome lots to Lennar, recognizing
        as
        revenue an average price of $87,560 per lot, which includes the initial
        recognition of $85,000 per lot plus water and sewer fees, road fees and other
        off-site fees.  The Company also delivered 3 single family lots to
        Lennar, recognizing as revenue an average price of $117,860 per lot, which
        includes the initial recognition of $115,300 per lot plus water and sewer
        fees,
        road fees and other off-site fees.  For the six months ended June 30,
        2006, we delivered 26 single family lots to Lennar, recognizing as revenue
        an
        average price of $127,560 per lot, which includes the initial recognition
        of
        $125,000 per lot plus water and sewer fees, road fees and other off-site
        fees.
 For
        the
        three months ended June 30, 2007, we recognized $967,000 related to the delivery
        of 10 residential lots to Lennar, of which 7 were townhome lots and 3 were
        single-family lots, as compared to $765,000 related to 6 single-family lots
        delivered in the three months ended June 30, 2006.  For the three
        months ended June 30, 2007, we delivered 7 townhome lots to Lennar, recognizing
        as revenue an average price of $87,560 per lot, which includes the initial
        recognition of $85,000 per lot plus water and sewer fees, road fees and other
        off-site fees.  The Company also delivered 3 single family lots to
        Lennar, recognizing as revenue an average price of $117,860 per lot, which
        includes the initial recognition of $115,300 per lot plus water and sewer
        fees,
        road fees and other off-site fees.  For the three months ended June
        30, 2006, we delivered 6 single family lots to Lennar, recognizing as revenue
        an
        average price of $127,560 per lot, which includes the initial recognition
        of
        $125,000 per lot plus water and sewer fees, road fees and other off-site
        fees.
 As
        of
        June 30, 2007, 1,626 lots remained under contract to Lennar of which 154
        single
        family lots and 39 townhome lots were developed and ready for
        delivery.
 In
        addition to initial lot settlement, during the first six months of 2007 and
        2006
        we also recognized $1,075,000 and $1,707,000, respectively, of additional
        revenue for lots that were previously sold to Lennar in 2006 and
        2005.  During the second quarter of 2007 and 2006, we recognized
        $761,000 and $1,115,000, respectively, of additional revenue for lots previously
        sold to Lennar.  This additional revenue is based on the final
        settlement price of the homes as provided by our agreement with
        Lennar.
 
 *Commercial
        Land Sales*
 For
        the
        six months ended June 30, 2007, we sold 5.78 commercial acres in St. Charles
        for
        $2,660,000 as compared to 10.46 acres for $1,602,000 for the six months ended
        June 30, 2006.  For the three months ended June 30, 2007, we did not
        close any contracts for commercial acres, but did recognize $123,000 of revenue
        related to work completed on incomplete parcels previously sold as compared
        to
        the sale of 7.81 acres for $802,000 for the three months ended June 30,
        2006.  As of June 30, 2007, our commercial sales backlog contained
        95.22 acres under contract for a total of $16,941,000.
 
 *St.
        Charles Active Adult Community, LLC – Land Joint Venture*
 In
        September 2004, the Company entered into a joint venture agreement with Lennar
        Corporation for the development of a 352-unit, active adult community located
        in
        St. Charles, Maryland.  The Company manages the project’s development
        for a market rate fee pursuant to a management agreement.  In
        September 2004, the Company transferred land to the joint venture in exchange
        for a 50% ownership interest and $4,277,000 in cash.  The Company’s
        investment in the joint venture was recorded at 50% of the historical cost
        basis
        of the land with the other 50% recorded within our deferred charges and other
        assets.  The proceeds received are reflected as deferred revenue. The
        deferred revenue and related deferred costs will be recognized into income
        as
        the joint venture sells lots to Lennar.  In March 2005, the joint
        venture closed a non-recourse development loan which was amended in June
        2006
        and again in December 2006.  Per the terms of the loan, both the
        Company and Lennar provided development completion guarantees.
  ***-
            23 -***
 ***Table
            of Contents***
  In
        the
        six and three months ended June 30, 2007, the joint venture delivered 30
        and 16
        lots to Lennar as compared to none for the six and three months ended June
        30,
        2006.  Accordingly, for the six and three months ended June 30, 2007,
        the Company recognized $655,000 and $363,000 in deferred revenue, off-site
        fees
        and management fees and $218,000 and $125,000 of deferred costs.
 
 *Gross
        Margin on Land Sales*
 The
        gross
        margin on land sales for the six and three months ended June 30, 2007, were
        27%
        and 35% as compared to 45% and 46% for the same period of 2006.  Gross
        margins differ from period to period depending on the mix of land
        sold.  In the six months ended June 30, 2007, our commercial acres
        represented a significant portion of our land sales and the commercial parcels
        sold had lower margins than our residential lot sales.  For the
        commercial sales in the six and three months ended June 30, 2006, the parcels
        sold had higher margins relative to those sold in the same periods of
        2007.  The gross margins on our residential land sales for the U.S.
        have remained relatively stable for the six and three months ended June 30,
        2007, and the six and three months ended June 30, 2006.
 
 *Customer
        Dependence*
 Residential
        land sales to Lennar within our U.S. segment were $3,309,000 for the six
        months
        ended June 30, 2007, which represents 13% of the U.S. segment’s revenue and 8%
        of our total year-to-date consolidated revenue.  No customers
        accounted for more than 10% of our consolidated revenue for the six months
        ended
        June 30, 2007.  However, loss of all or a substantial portion of our
        land sales, as well as the joint venture’s land sales, to Lennar would have a
        significant adverse effect on our financial results until such lost sales
        could
        be replaced.
 
 **Management
        and Other Fees – U.S. Operations:**
 We
        earn
        monthly management fees from all of the apartment properties that we own,
        as
        well as our management of apartment properties owned by third parties and
        affiliates of J. Michael Wilson.  Effective February 28, 2007, the
        Company’s management agreement with G.L. Limited Partnership was terminated upon
        the sale of the apartment property to a third party.  Effective April
        30, 2006, the Company’s management agreement with Chastleton Associates LP was
        also terminated upon the sale of the apartment property to a third party.
        These
        properties were previously owned by an affiliate. Management fees generated
        by
        each of these properties accounted for less than 1% of the Company’s total
        revenue.
 We
        receive an additional fee from the properties that we manage for their use
        of
        the property management computer system that we purchased at the end of 2001
        and
        a fee for vehicles purchased by the Company for use on behalf of the properties.
        The cost of the computer system and vehicles are reflected within depreciation
        expense.
 The
        Company manages the project development of the joint venture with Lennar
        for a
        market rate fee pursuant to a management agreement.  These fees are
        based on the cost of the project and a prorated share is earned when each
        lot is
        sold.
 For
        the
        six and three months ended June 30, 2007, management fees decreased $61,000
        and
        $30,000, respectively as compared to the six and three months ended June
        30,
        2006.  These amounts only include the fees earned from the
        non-controlled properties; the fees earned from the controlled properties
        are
        eliminated in consolidation.
 
 **General,
        Administrative, Selling and Marketing Expense – U.S.
        Operations:**
 The
        costs
        associated with the oversight of our U.S. operations, accounting, human
        resources, office management and technology, as well as corporate and other
        executive office costs are included in this section. ARMC employs the
        centralized office management approach for its property management services
        for
        our properties located in St. Charles, Maryland, our properties located in
        the
        Baltimore, Maryland area and the property in Virginia and, to a lesser extent,
        the other properties that we manage. Our unconsolidated and managed-only
        apartment properties reimburse ARMC for certain costs incurred at the central
        office that are attributable to the operations of those properties. In
        accordance with EITF Topic 01-14, “*Income Statement Characterization of
        Reimbursements Received for Out of Pocket Expenses Incurred*,” the cost and
        reimbursement of these costs are not included in general and administrative
        expenses, but rather they are reflected as separate line items on the
        consolidated income statement.
 General,
        administrative, selling and marketing costs incurred within our U.S. operations
        increased $745,000 to $3,923,000 for the six months of 2007 compared to
        $3,178,000 for the same period of 2006.  The 23% increase is primarily
        attributable to increases in our consulting and legal fees related to strategic
        planning including fees associated with an evaluation of a recapitalization
        of
        the company, and consulting services provided for our FIN 48 implementation
        during the first quarter of 2007, as well as other increases in salaries
        and
        benefits related to the quarterly accrual in 2007 of estimated management
        bonuses.  The increases were offset in part by decreases in audit and
        accounting expenses as a result of the non-recurring work in the first quarter
        of 2006 related to the closing agreement reached with the IRS, as well as
        decreases in our share appreciation rights expense and corporate
        donations.
 General,
        administrative, selling and marketing costs incurred within our U.S. operations
        increased $680,000 to $2,176,000 for the three months ended June 30, 2007,
        compared to $1,496,000 for the same period of 2006.  The 45% increase
        is primarily attributable to increases in our consulting and legal services
        related to strategic planning including an evaluation of a recapitalization
        of
        the company, as well as other increases in salaries and benefits related
        to the
        quarterly accrual in 2007 of estimated management bonuses.  The
        Company also experienced an increase in share appreciation rights expense
        for
        the quarter to date period as a result of a decrease in fair value recorded
        in
        the second quarter of 2006.  The increases were offset in part by
        decreases corporate donations.
 We
        anticipate additional costs will be incurred as part of the company’s strategic
        planning activities noted above.  These costs include, but are not
        limited to, legal fees, consulting fees, and fees paid to the Special Committee
        to the Board of Trustees.
 ***-
            24 -***
 ***Table
            of Contents***
  **Depreciation
        Expense – U.S. Operations:**
 Depreciation
        expense increased $470,000 to $2,745,000 for the first six months of 2007
        compared to $2,275,000 for the same period in 2006.  The depreciation
        expense also increased $275,000 to $1,474,000 compared to $1,199,000 for
        the
        three months ended June 30, 2006.  The year to date and quarter to
        date increases in depreciation are primarily the result of depreciation related
        to the acquisitions of Milford Station I and Milford Station II and the
        depreciation related to Sheffield Greens Apartments, all of which accounted
        for
        $308,000 and $221,000 of the variances, respectively.  The balance of
        the increases relate to the recent refinancings of
 several
        properties at the end of 2006 and beginning of 2007.  The Company used
        part of the proceeds to make significant investments in capital improvements
        at
        these properties resulting in increased depreciation expense for both the
        year
        to date and quarter to date.
 
 **Interest
        Income – U.S. Operations:**
 Interest
        income increased $532,000 to $591,000 for the six months ended June 30, 2007,
        as
        compared to $59,000 for the six months ended June 30, 2006.  The
        increase was primarily attributable to $299,000 of interest income accrued
        on
        the undistributed bond proceeds held in escrow by Charles County for the
        six
        months ended June 30, 2007.  The Company reached a written agreement
        with the County regarding interest earned on amounts held in escrow by the
        County, but not yet drawn by the Company, whereby the Company is now able
        to
        accrue investment income on the related receivables.  In addition, the
        Company earned $230,000 on investments of cash received from the various
        apartment partnership refinancings at the end of last year and the beginning
        of
        this year and has earned interest accordingly.
 Interest
        income increased $260,000 to $294,000 for the three months ended June 30,
        2007,
        as compared to $34,000 for the three months ended June 30, 2006.  The
        increase was primarily attributable to $147,000 of interest income accrued
        on
        the undistributed bond proceeds held in escrow by Charles County for the
        three
        months ended June 30, 2007.  The Company reached a written agreement
        with the County regarding interest earned on amounts held in escrow by the
        County, but not yet drawn by the Company, whereby the Company is now able
        to
        accrue investment income on the related receivables.  In addition, the
        Company earned $115,000 on investments of cash received from the various
        apartment partnership refinancings at the end of last year and the beginning
        of
        this year and has earned interest accordingly.
 
 **Interest
        Expense – U.S. Operations:**
 The
        Company considers interest expense on all U.S. debt available for capitalization
        to the extent of average qualifying assets for the period.  Interest
        specific to the construction of qualifying assets, represented primarily
        by our
        recourse debt, is first considered for capitalization.  To the extent
        qualifying assets exceed debt specifically identified, a weighted average
        rate
        including all other debt of the U.S. segment is applied.  Any excess
        interest is reflected as interest expense.  For 2007 and 2006, the
        excess interest primarily relates to the interest incurred on the non-recourse
        debt from our investment properties.
 Interest
        expense increased $2,578,000 for the first six months of 2007 to $6,626,000,
        as
        compared to $4,048,000 for the same period of 2006.  Interest expense
        increased $1,045,000 for the second quarter of 2007 to $3,160,000 as compared
        to
        $2,115,000 for the same period of 2006.  The year to date and quarter
        to date increases were primarily attributable to interest expense incurred
        at
        new properties, including Sheffield Greens Apartments, Milford Station I
        and
        Milford Station II all of which accounted for $890,000 and $400,000 of the
        increase, respectively.  In addition, the refinancing of several
        apartment mortgages during the fourth quarter of 2006 and early first quarter
        2007 increased interest expense at Fox Chase Apartments, LLC, New Forest
        Apartments, LLC, Coachman’s Apartments LLC and Village Lake Apartments,
        LLC.  Additionally, interest expense increased as a result of accrued
        interest on uncertain tax positions associated with our implementation of
        FIN 48
        in the first quarter 2007.
 For
        the
        six and three months ended June 30, 2007, $601,000 and $319,000 of interest
        cost
        was capitalized.  During the same period in 2006, $732,000 and
        $443,000 of interest cost was capitalized.
 
 **Provision
        for Income Taxes – U.S. Operations:**
 The
        effective tax rates for the six and three months ended June 30, 2007, and
        June
        30, 2006, were 33% and 46% and 43% and 44%, respectively.  The
        statutory rate is 40%.  The effective tax rate for 2007 differs from
        the statutory rate due to the relatively small net losses for the six and
        three
        months ended June 30, 2007, the related benefit for which, was partially
        offset
        by accrued penalties on uncertain tax positions as part of the implementation
        of
        FIN 48.  The effective tax rates for 2006 differ from the statutory
        rate due to certain permanent differences and state taxes.
 
 **Results
        of Operations – Puerto Rico Operations:**
 For
        the
        six months ended June 30, 2007, our Puerto Rico segment generated $3,915,000
        of
        operating income compared to $4,968,000 of operating income generated by
        the
        segment for the same period in 2006.  For the three months ended June
        30, 2007, our Puerto Rico segment generated $1,815,000 of operating income
        compared to $2,890,000 of operating income for the same period of
        2006.  Additional information and analysis of the Puerto Rico
        operations can be found below.
 
 **Rental
        Property Revenues and Operating Expenses – Puerto Rico
        Operations:**
 Our
        rental property revenues and
        expenses are generated primarily from the 12 multifamily apartment properties
        located in the San Juan metropolitan area.  In addition, the Company
        operates a commercial rental property in the community of Parque Escorial,
        known
        as Escorial Building One (“EBO”), in which it holds a 100% ownership
        interest.  EBO is a three-story building with
        approximately
  ***-
            25 -***
 ***Table
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  56,000
        square feet of offices space for lease.  The Company moved the Puerto
        Rico Corporate Office to the new facilities in the third quarter of 2005,
        and
        leases approximately 20% of the building.
 
 *Six
        Months*
 Rental
        property revenues increased $594,000 or 6% to $11,126,000 for the six months
        ended June 30, 2007 compared to $10,532,000 for the same period of
        2006.  The year to date increase in our rental property revenues was
        primarily the result of an overall rent increases of 3% from HUD on our
        multifamily apartment properties.  The multifamily apartment
        properties also experienced a 20% increase in other revenues.  In
        addition, rents for our commercial rental property, EOB, increased 89% for
        the
        year to date period as tenants occupied the new office building.
 Rental
        property operating expenses increased $195,000 or 4% to $5,638,000 for the
        six
        months ended June 30, 2007 compared to $5,443,000 for the same period of
        2006.  The year to date increase was the result of a 2% increase to
        our multifamily apartment properties operating expenses driven by overall
        inflationary adjustments as well as specific above inflation increases noted
        in
        utilities and repairs.  In addition, operating expenses for our
        commercial rental property, EOB, increased 27% for the year to date period
        as a
        result of increased occupancy.
 
 *Three
        Months*
 Rental
        property revenues increased $333,000 or 6% to $5,621,000 for the three months
        ended June 30, 2007 compared to $5,288,000 for the same period of
        2006.  The quarter to date increase in our rental property revenues
        was primarily the result of an overall rent increases of 3% from HUD on our
        multifamily apartment properties.  The multifamily apartment
        properties also experienced a 20% increase in other revenues.  In
        addition, rents for our commercial rental property, EOB, increased 96% for
        the
        three-month period as a result of lease up efforts and new tenants.
 Rental
        operating expenses increased $113,000 or 4% to $2,907,000 for the three months
        ended June 30, 2007 compared to $2,794,000 for the same period in
        2006.  The quarter to date increase was the result of a 3% increase to
        our multifamily apartment properties operating expenses driven by overall
        inflationary adjustments as well as specific above inflation increases noted
        in
        utilities and repairs.  In addition, operating expenses for our
        commercial rental property, EOB, increased 24% for the three-month period
        as a
        result of increased occupancy.
 
 **Community
        Development – Puerto Rico Operations:**
 Total
        land sales revenue in any one period is affected by commercial sales which
        are
        cyclical in nature and usually have a noticeable positive impact on our earnings
        in the period in which settlement is made.
 There
        were no community development land sales during the six and three months
        ended
        June 30, 2007 and 2006.  There were no commercial contracts for
        commercial sales in backlog at June 30, 2007.
 
 **Homebuilding
        – Puerto Rico Operations:**
 The
        Company organizes corporations as needed to operate each individual homebuilding
        project.  In April 2004, the Company commenced the construction of a
        new 160-unit mid-rise condominium complex known as Torres del Escorial
        (“Torres”).  The condominium units were offered to buyers in the
        market in January 2005 and delivery of the units commenced in the fourth
        quarter
        of 2005.  The condominium units are sold individually from an onsite
        sales office to pre-qualified homebuyers.
 For
        the
        six months ended June 30, 2007, homebuilding revenues decreased $6,045,000
        or
        54% to $5,214,000 as compared to $11,259,000 for the six months ended June
        30,
        2006.  The decrease in year to date revenues was primarily driven by a
        decrease in the number of units sold in the respective periods, offset in
        part
        by an increase in the per unit selling prices.  For the six months
        ended June 30, 2007, the company sold 20 units at an average selling price
        of
        $261,000 as compared to 45 units at an average selling price of $250,000
        per
        unit for the same period of 2006.
 For
        the
        three months ended June 30, 2007, homebuilding revenues decreased $5,108,000
        or
        71% to $2,126,000 as compared to $7,234,000 for the three months ended June
        30,
        2006.  The decrease in quarter to date revenues was also primarily
        driven by a decrease in the number of units sold in the respective periods,
        offset in part by an increase in the per unit selling prices.  For the
        three months ended June 30, 2007, the company sold 8 units at an average
        selling
        price of $266,000 as compared to 29 units at an average selling price of
        $249,000 per unit for the same period of 2006.
 The
        gross
        margin for the six and three months ended June 30, 2007 were 27% and 28%,
        respectively, while for the six and three months of 2006 were 24% for both
        periods.   The increases in the gross profit margin are
        attributable to an increase in the sales prices of the units in the third
        and
        fourth buildings.
 As
        of June 30, 2007, 3 units of
        Torres were under contract at an average selling price of $300,000 per
        unit.  Each sales contract is backed by a $6,000
        deposit.  For the six months ended June 30, 2007, the Company had 13
        new contracts and 5 canceled contracts.  For the same period in 2006, the
        Company had 33 new contracts and 27 canceled contracts.  The Puerto
        Rico real estate market has slowed substantially since the second quarter
        of
        2006.  The reduction of new contracts and the reduced pace of sales
        has impacted the Company somewhat, but not to the same extent as the overall
        Puerto Rico market decline.  The Company currently anticipates that
        the remaining 30 units in Torres will sell during the balance of 2007 and
        into
        the first quarter of 2008 and that its current pricing remains
        competitive.
 
  ***-
            26 -***
 ***Table
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  **Management
        and Other fees – Puerto Rico Operations:**
 We
        earn monthly fees from our
        management of four non-owned apartment properties and four property-owner
        associations operating in Parque Escorial.  This section includes only
        the fees earned from the non-owned managed entities.  The fees earned
        from the controlled properties are eliminated in consolidation.
 Management
        fees increased 6% or $17,000 to $313,000 for the six months ended June 30,
        2007,
        as compared to $296,000 for the same period of 2006.  During the three
        months ended June 30, 2007 management fees increased 9% or $13,000 to $160,000
        as compared to $147,000 for the same period of 2006.  The year to date
        and quarter to date increases in our management fees resulted
 from
        increases in the annual rents in the non-owned apartment properties and from
        increases in the managed fees received from Parque Escorial Association during
        the respective periods.
 
 **General,
        Administrative, Selling and Marketing Expenses – Puerto Rico
        Operations:**
 The
        costs
        associated with the oversight of our operations, accounting, human resources,
        office management and technology are included within our general,
        administrative, selling and marketing expenses.  The apartment
        properties reimburse IGP for certain costs incurred at IGP’s office that are
        attributable to the operations of those properties.  In accordance
        with EITF 01-14 the costs and reimbursement of these costs are not included
        within this section but rather, they are reflected as separate line items
        on the
        consolidated income statement.  Due to the fact that our corporate
        office is in our office building, EBO, rent expense and parking expenses
        are
        eliminated in consolidation.
 General,
        administrative, selling and marketing expenses increased 7% or $92,000 to
        $1,448,000 during the six months ended June 30, 2007, as compared to $1,356,000
        for the same period of 2006.  The increase is primarily attributable
        to increases in salaries and benefits related to the accrual in 2007 of
        quarterly management bonuses.
 During
        the quarter ended June 30, 2007, general, administrative, selling and marketing
        increased 21% or $126,000 to $732,000 as compared to $606,000 for the same
        period of 2006.  The increase is primarily attributable to increases
        in salaries and benefits related to the accrual in 2007 of quarterly management
        bonuses and an increase in share appreciation rights expense for the quarter
        to
        date period as a result of a decrease in fair value recorded in the second
        quarter of 2006.
 
 **Depreciation
        Expense – Puerto Rico Operatio**
 Depreciation
        expense for the six months ended June 30, 2007 increased $37,000 or 2% to
        $1,836,000 as compared to $1,799,000 for the six months ended June 30,
        2006.  Depreciation expense for the three months ended June 30, 2007
        increased $21,000 or 2% to $923,000 as compared to $902,000 for the six months
        ended June 30, 2006.  The nominal increases in the year to date and
        quarter to date amounts relate to depreciation expense due to the replacement
        of
        elevators in select apartment properties.  In addition, the
        depreciation expense increased due to the relocation of our offices primarily
        related to our corporate office furniture and leasehold
        improvements.
 
 **Interest
        Income – Puerto Rico Operations:**
 Interest
        income for the six months ended June 30, 2007 increased $166,000 to $226,000
        as
        compared to $60,000 for the same period of 2006.  The increase in year
        to date interest income was primarily attributable to the recognition of
        interest income on the El Monte note receivable.  The note originated
        as part of the sale of the complex in December 2004, at which point the Company
        determined that the cost recovery method of accounting was appropriate for
        gain
        recognition.  Accordingly, the interest income on this note was also
        deferred until the interest payment was received, which occurred in January
        2007.  Interest income for the three months ended June 30, 2007
        decreased $4,000 to $11,000 as compared to $15,000 for the same period of
        2006.
 
 **Equity
        in Earnings from Unconsolidated Entities – Puerto Rico
        Operations:**
 We
        account for our limited partner
        investment in the commercial rental property owned by ELI and El Monte under
        the
        equity method of accounting.  The earnings from our investment in
        commercial rental property are reflected within this section.  The
        recognition of earnings depends on our investment basis in the property,
        and
        where the partnership is in the earnings stream.
 Equity
        in
        earnings from unconsolidated entities for the six and three months ended
        June
        30, 2007 was $1,846,000 and $173,000, respectively, compared to $343,000
        and
        $173,000 for the same periods of 2006.  The year to date increase of
        $1,503,000 was related to the payment in full of the $1,500,000 note receivable
        held by El Monte in January 2007.  The note was received as part of
        the sale of the El Monte facility, at which point the Company determined
        that
        the cost recovery method of accounting was appropriate for gain
        recognition.  Accordingly, revenue was deferred until collection of
        the note receivable, which occurred in January 2007.
 
 **Interest
        Expense – Puerto Rico Operations:**
 The
        Company considers interest expense
        on all Puerto Rico debt available for capitalization to the extent of average
        qualifying assets for the period.  Interest specific to the
        construction of qualifying assets is first considered for
        capitalization.  To the extent qualifying assets exceed debt
        specifically identified a weighted average rate including all other debt
        of the
        Puerto Rico segment is applied.  Any excess interest is reflected as
        interest expense.  For 2007 and 2006, the excess interest primarily
        relates to the interest incurred on the non-recourse debt from our investment
        properties.
 For
        the
        six months ended June 30, 2007, interest expense decreased $4,000 or less
        than
        1% to $3,166,000 as compared to $3,170,000 for the same period of
        2006.  For the three months ended June 30, 2007, interest expense
        decreased $17,000 or 1% to
  ***-
            27 -***
 ***Table
            of Contents***
  $1,585,000
        as compared to $1,602,000 for the same period of 2006.  The year to
        date and quarter to date decreases are nominal and resulted from self amortizing
        mortgages on our multifamily apartment partnerships offset in part by decreased
        interest capitalized as a function of amounts available for interest
        capitalization between the respective periods.
 For
        the
        six and three months ended June 30, 2007, $78,000 and $39,000 of interest
        cost
        was capitalized.  During the same periods in 2006, $496,000 and
        $224,000 of interest cost was capitalized.  The decrease in amounts of
        interest capitalized was due to the substantial completion of our Torres
        project
        at the end of 2006 as completed units are not considered qualifying assets
        for
        the purposes of interest capitalization.
 
 **Minority
        Interest in Consolidated Entities – Puerto Rico
        Operations:**
 The
        Company records minority interest expense related to the minority partners’
share of the consolidated apartment partnerships earnings and distributions
        to
        minority partners in excess of their basis in the consolidated
        partnership.  Losses charged to the minority interest are limited to
        the minority partners’ basis in the partnership.  Because the minority
        interest holders in most of our partnerships have received distributions
        in
        excess of their basis, we anticipate volatility in minority interest
        expense.  Although this allows us to recognize 100 percent of the
        income of the partnerships up to distributions and losses in excess of basis
        previously required to be recognized as our expense, we will be required
        to
        expense 100 percent of future distributions to minority partners and any
        subsequent losses.
 Minority
        interest for the six and three months period ended June 30, 2007 were $1,384,000
        and $12,000, respectively.  Minority interest for the six and three
        months period ended June 30, 2006 were $2,354,000 and $1,297,000,
        respectively.    The $970,000 decrease in minority interest
        expense for the six months ended June 30, 2007 as compared to the six month
        period ended June 30, 2006 was primarily the result of regular distributions
        from the surplus cash and refinancing to the minority owners in excess of
        their
        basis from our consolidated apartment partnerships.  In the first
        quarter of 2007, the company made refinancing distributions of $400,000 to
        the
        limited partners of Carolina Associates related to the mortgage refinancing
        of
        the related properties.  In the second quarter of 2006, the Company
        made distributions of $1,100,000 to the limited partners of Colinas de San
        Juan
        related the mortgage refinancing of the related properties.  The
        Colinas distribution also represents the primary component of the $1,285,000
        decrease in minority interest expense for the three months ended June 30,
        2007
        as compared to the three month period ended June 30, 2006.
 
 **Provision
        for Income Taxes – Puerto Rico Operations:**
 The
        effective tax rate for the six and three months ended June 30, 2007 and 2006
        were 49% and 37% and 39% and 28%, respectively. The statutory rate is
        29%.  The difference in the statutory tax rate and the effective tax
        rate for the six months ended June 30, 2007 is primarily due to the double
        taxation on the earnings of our wholly owned corporate subsidiary,
        ICP.  As a result of a non-recurring gain recorded in the first
        quarter 2007 related to its investment in El Monte, ICP’s current taxes payable
        and ACPT’s related deferred tax liability on the ICP undistributed earnings
        experienced a considerable increase for the six months ended June 30, 2007.
        In
        addition, the effective tax rate for the three months ended June 30, 2007
        was
        affected by the true-up of certain permanent differences. For the six month
        period ended June 30, 2006, the effective tax rate was greater than the
        statutory rate due to a relatively small net loss for the period, which was
        disproportionately impacted by non-taxable items, such as the tax exempt
        income
        received from our commercial partnership ELI, SE, offset in part by deferred
        taxes on items for which no current benefit may be recognized.  The
        effective rate for the three months ended June 30, 2006 did not differ
        substantially from the statutory rate.
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 *Summary
        of Cash Flows*
 As
        of
        June 30, 2007, the Company had cash and cash equivalents totaling $22,303,000
        and restricted cash totaling $22,601,000.  The following table sets
        forth the changes in the Company’s cash flows ($ in thousands):
 
 Six
                  Months Ended June 30,**2007**
              
              
              2006Operating
                  Activities
              
              **$**
              **(7,072**
              **)**
              
              $
              2,315Investing
                  Activities
              
              ****
              **(5,489**
              **)**
              
              
              (23,085
              )Financing
                  Activities
              
              ****
              **7,405**
              
              
              
              13,079Net
                  Decrease in Cash
              
              **$**
              **(5,156**
              **)**
              
              $
              (7,691
              )
 
 For
        the
        six months ended June 30, 2007, operating activities used $7,072,000 of cash
        flows compared to $2,315,000 of cash flows provided by operating activities
        for
        the six months ended June 30, 2006.  The $9,387,000 decrease in cash
        flows from operating activities for the second quarter of 2007 compared to
        the
        same period in 2006 is primarily related to the $6,045,000 decrease in
        homebuilding sales in the second quarter 2007 as compared to
        2006.  Operating cash flows were also impacted by the additions to our
        community development assets for the six months ended June 30, 2007, which
        were
        $4,186,000 in excess of the additions during the same period of
        2006.  The Company continues to invest a significant amount  ***-
              28 -***
 ***Table
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 into
        infrastructure within St. Charles.  In addition, the company
        significantly reduced accounts payable and accrued liabilities during the
        six
        months ended June 30, 2007 related to payments on outstanding development
        expenditures and other payables at year end.  These uses of cash were
        offset by a decrease of $3,961,000 in our homebuilding expenditures for the
        six
        months ended June 30, 2007, as compared to the same period in
        2006.  As of June 30, 2007, the Torres project was substantially
        complete, whereas it was undergoing significant construction during the first
        half of 2006.  In addition, the company received a $2,000,000 fee
        during the second quarter 2007 related to a right of way
        agreement.  From period to period, cash flow from operating activities
        is also impacted by changes in our net income, as discussed more fully above
        under "Results of Operations," as well as other changes in our receivables
        and
        payables.
 For
        the
        six months ended June 30, 2007, net cash used in investing activities was
        $5,489,000 compared to $23,085,000 for the same period of 2006.  Cash
        provided by or used in investing activities generally relates to increases
        in
        our investment portfolio through acquisition, development or construction
        of
        rental properties and land held for future use, net of returns on our
        investments. The change in cash related to investing activities was primarily
        the result of acquiring the Milford I and Milford II properties during the
        six
        months ended June 30, 2006.  In addition, we completed the
        construction of Sheffield Greens Apartments during the first quarter of 2007,
        whereas during the first half of 2006 we invested $7,747,000 in
        construction.  These differences were partially offset
 by
        the 11
        additional properties added to our consolidation as of January 1, 2006, under
        the new provisions of EITF-04-05, at which point we added $4,723,000 to the
        consolidated cash balance.
 For
        the
        six months ended June 30, 2007, net cash provided by financing activities
        was
        $7,405,000 as compared to $13,079,000 for the six months ended June 30,
        2006.  The decrease in cash provided by financing activities was
        primarily the result of reduced proceeds from debt financing, related to
        the
        mortgages for the Milford I and Milford II acquisition.  In addition,
        cash flows from financing activities were decreased by the timing of
        distribution payments made to minority interests as well as decreased dividends
        to shareholders.  Distributions to limited partners decreased as a
        result of reduced refinancing distributions between
        periods.  Dividends to shareholders were reduced as a result of a
        non-recurring special dividend distribution made in the first half of
        2006.  Partially offsetting these decreases was an increase in draws
        on the Charles County bond escrow as construction of infrastructure within
        St.
        Charles continues.
 
 *Contractual
        Financial Obligations*
 The
        following chart reflects our contractual financial obligations as of June
        30,
        2007:
 
 
 **Payments
                  Due By Period****Less
                  Than**
              
              
              **After****Total**
              **1
                  Year**
              **1-3
                  Years**
              **4-5
                  Years**
              **5
                  Years**Recourse
                  debt-community developmentand
                  homebuilding
              $      26,255
              $       1,390
              $      4,752
              $     3,229
              $     16,884Capital
                  lease obligations
              128
              27
              59
              35
              7Total
                  Recourse Debt
              26,383
              1,417
              4,811
              3,264
              16,891Non-recourse
                  debt-community development
              500
              500
              -
              -
              -Non-recourse
                  debt-investment properties
              280,168
              3,750
              14,749
              9,089
              252,580Total
                  Non-Recourse Debt
              280,668
              4,250
              14,749
              9,089
              252,580Operating
                  lease obligations
              942
              298
              540
              104
              -Purchase
                  obligations
              30,148
              16,050
              13,923
              50
              125Total
                  contractual financial obligations
              $    338,141
              $     22,015
              $    34,023
              $   12,507
              $   269,596
 
 Recourse
        Debt - U.S. Operations
 On
        April
        14, 2006, the Company closed a three-year $14,000,000 revolving line of credit
        loan (“the Revolver”) secured by a first lien deed of trust on property located
        in St. Charles, MD.  The maximum amount of the loan at any one time is
        $14,000,000.  The facility includes various sub-limits on a revolving
        basis for amounts to finance apartment project acquisitions and land development
        in St. Charles.  The terms require certain financial covenants to be
        calculated annually as of December 31, including a tangible net worth to
        senior
        debt ratio for ALD and a minimum net worth test for ACPT.  The Company
        was in compliance with these financial covenants as of June 30,
        2007.  As of June 30, 2007, no amounts were outstanding on the
        Revolver.  Management currently expects to fund development operations
        from current cash balances and operating cash flows rather than borrowings
        from
        the line of credit.
 Pursuant
        to an agreement reached between ACPT and the Charles County Commissioners
        in
        2002, the Company agreed to accelerate the construction of two major roadway
        links to the Charles County (the "County") road system. As part of the
        agreement, the County agreed to issue general obligation public improvement
        Bonds (the “Bonds”) to finance $20,000,000 of this construction
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  guaranteed
        by letters of credit provided by Lennar as part of a residential lot sales
        contract for 1,950 lots in Fairway Village.  The Bonds were issued in three
        installments with the final $6,000,000 installment issued in March 2006. 
The Bonds bear interest rates ranging from 4% to 8%, for a blended lifetime
        rate
        for total Bonds issued to date of 5.1%, and call for semi-annual interest
        payments and annual principal payments and mature in fifteen
        years.  Under the terms of bond repayment agreements between the
        Company and the County, the Company is obligated to pay interest and principal
        on the full amount of the Bonds; as such, the Company recorded the full amount
        of the debt and a receivable from the County representing the undisbursed
        Bond
        proceeds to be advanced to the Company as major infrastructure development
        within the project occurs.  As part of the agreement, the Company will
        pay the County a monthly payment equal to one-sixth of the semi-annual interest
        payments and one-twelfth of the annual principal payment due on the
        Bonds.  The County also requires ACPT to fund an escrow account from
        lot sales that will be used to repay this obligation.
 In
        August
        2005, the Company signed a memorandum of understanding ("MOU") with the Charles
        County Commissioners regarding a land donation that is anticipated to house
        a
        planned minor league baseball stadium and entertainment
        complex.  Under the terms of the MOU, the Company donated 42 acres of
        land in St. Charles to the County on December 31, 2005. The Company also
        agreed
        to expedite off-site utilities, storm-water management and road construction
        improvements that will serve the entertainment
 complex
        and future portions of St. Charles so that the improvements will be completed
        concurrently with the entertainment complex.  The County will be
        responsible for infrastructure improvements on the site of the complex. In
        return, the County agreed to issue $7,000,000 of general obligation bonds
        to
        finance the infrastructure improvements.  In March 2006, $4,000,000 of
        bonds were issued for this project, with an additional $3,000,000 issued
        in
        March 2007.  The funds provided by the County for this project will be
        repaid by ACPT over a 15-year period.  In addition, the County agreed
        to issue an additional 100 school allocations a year to St. Charles commencing
        with the issuance of bonds.
 In
        December 2006, the Company reached an agreement with Charles County whereby
        the
        Company receives interest payments on any undistributed bond proceeds held
        in
        escrow by the County.  The agreement covers the period from July 1,
        2005, through the last draw made by the Company. For the six and three months
        ended June 30, 2007, the Company recognized $299,000 and $147,000 of interest
        income on these escrowed funds.
 
 Recourse
        Debt - Puerto Rico Operations
 Substantially
        all of the Company's 490 acres of community development land assets in Parque
        El
        Comandante within the Puerto Rico segment are encumbered by recourse debt.
         The homebuilding and land assets in Parque Escorial are unencumbered as of
        June 30, 2007.  On September 1, 2006, LDA secured a revolving line of
        credit facility of $15,000,000 to be utilized as follows: (i) to repay its
        outstanding loan of $800,000; and (ii) to fund development costs of a project
        in
        which the Company plans to develop a planned community in Canovanas, Puerto
        Rico, to fund acquisitions and/or investments mainly in estate ventures,
        to fund
        transaction costs and expenses, to fund future payments of interest under
        the
        line of credit and to fund any future working capital needs of the
        Company.  The line of credit bears interest at a fluctuating rate
        equivalent to the LIBOR Rate plus 200 basis points (7.35% at June 30, 2007)
        and
        matures on August 31, 2008.  The outstanding balance of this facility
        on June 30, 2007, was $1,800,000.
 
 Non-Recourse
        Debt - U.S. Operations
 As
        more
        fully described in Note 4 to our Consolidated Financial Statements included
        in
        this Form 10-Q, the non-recourse apartment properties' debt is collateralized
        by
        apartment projects.  As of June 30, 2007, approximately 38% of this debt is
        secured by the Federal Housing Administration ("FHA") or the Maryland Housing
        Fund.
 Non-recourse
        debt within our U.S. operations also includes a construction loan for a new
        apartment project in St. Charles.  On August 11, 2005, Sheffield
        Greens Apartments, LLC ("Sheffield Greens"), a wholly owned subsidiary of
        the
        Company, obtained a non-recourse construction loan of $27,008,000 to fund
        the
        construction costs for a new apartment property in St. Charles' Fairway Village.
        The construction loan will mature in September 2007 and at such time will
        convert into a 40-year non-recourse permanent mortgage. The loan has a fixed
        interest rate of 5.47%, and requires interest-only payments during the
        construction phase followed by principal and interest payments until maturity.
        The loan is subject to a HUD regulatory agreement. The loan documents provide
        for covenants and events of default that are customary for mortgage loans
        insured by the Federal Housing Authority.
 On
        January 31, 2007, Coachman’s Apartments, LLC (“Coachman’s”), a majority-owned
        subsidiary of the Company, secured a non-recourse mortgage of $11,000,000.
        The
        ten-year loan, amortized over 30 years, has a fixed interest rate of 5.555%,
        requires principal and interest payments through maturity and a balloon payment
        at the maturity date, February 1, 2017. The prior mortgage of $6,020,000
        was
        repaid and the net proceeds from the refinancing will be used for overall
        apartment property improvements, the repayment of recourse debt, future
        development efforts and potential acquisitions.
 On
        February 1, 2007, Village Lake Apartments, LLC (“Village Lake”), a
        majority-owned subsidiary of the Company, secured a non-recourse mortgage
        of
        $9,300,000. The ten-year loan, amortized over 30 years, has a fixed interest
        rate of 5.72%, requires principal and interest payments through maturity
        and a
        balloon payment at the maturity date, February 1, 2017. The prior mortgage
        of
        $6,981,000 was repaid and the net proceeds from the refinancing will be used
        for
        overall apartment property improvements, the repayment of recourse debt,
        future
        development efforts and potential acquisitions.
 In
        the
        fourth quarter of 2005, the Company purchased 22 residential acres adjacent
        to
        the Sheffield Neighborhood in St. Charles for $1,000,000.  The Company
        paid $500,000 in cash and signed a two-year, non-interest bearing, non-recourse
        note, for $500,000 due in November 2007.
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  Non-Recourse
        Debt - Puerto Rico Operations
 As
        more
        fully described in Note 4 to our Consolidated Financial Statements included
        in
        this Form 10-Q, the non-recourse debt is collateralized by the respective
        multifamily apartment project or commercial building.  As of June 30, 2007,
        approximately 1% of this debt is secured by the Federal Housing Administration
        ("FHA").  There were no significant changes to our non-recourse debt
        obligations during the six months ended June 30, 2007.
 
 Purchase
        Obligations and Other Contractual Obligations
 In
        addition to our contractual obligations described above, we have other purchase
        obligations consisting primarily of contractual commitments for normal operating
        expenses at our apartment properties, recurring corporate expenditures including
        employment, consulting and compensation agreements and audit fees, non-recurring
        corporate expenditures such as improvements at our investment properties,
        the
        construction of the new apartment projects in St. Charles, costs associated
        with
        our land development contracts for the County’s road projects and  the
        development of our land in the U.S. and Puerto Rico. Our U.S. and Puerto
        Rico
        land development and construction contracts are subject to increases in cost
        of
        materials and labor and other project overruns. Our overall capital requirements
        will depend upon acquisition opportunities, the level of improvements on
        existing properties and the cost of
 future
        phases of residential and commercial land development.
 
 *Liquidity
        Requirements*
 Our
        short-term liquidity requirements consist primarily of obligations under
        capital
        and operating leases, normal recurring operating expenses, regular debt service
        requirements, non-recurring expenditures and dividends to common
        shareholders.  The Company has historically met its liquidity
        requirements from cash flow generated from residential and commercial land
        sales, home sales, property management fees, and rental property revenue.
        However, the Company has noted a current reduction in the demand for residential
        real estate in the St. Charles and Parque Escorial markets.  Should
        this reduced demand result in a significant decline in the prices of real
        estate
        in the St. Charles and Parque Escorial markets or defaults on our sales
        contracts, it could adversely impact our cash flows.  In addition,
        reduced demand for our commercial property could result in significantly
        reduced
        prices of our commercial real estate and adversely impact our cash
        flows.  Currently, anticipated cash flow from operations, existing
        loans, refinanced or extended loans, and new financing are expected to meet
        our
        financial commitments for the year. However, there are no assurances that
        these
        funds will be generated.
 We
        are
        actively seeking additions to our multifamily apartment property portfolio
        and
        our real estate holdings.  We are currently pursuing various
        opportunities to purchase additional multifamily apartment properties in
        the
        Baltimore, Maryland and Washington, D.C. areas.   For the
        remainder of 2007 and into 2008, the Company plans to explore opportunities
        in
        Florida while continuing its development activity within the master planned
        communities in St. Charles and Puerto Rico and may commit to future contractual
        obligations as needed.  Future acquisitions may be financed through a
        combination of Company equity, third-party equity and market rate mortgages.
        For
        the remainder of 2007 and into 2008, we may seek additional development loans
        and permanent mortgages for continued development and expansion of St. Charles
        and Parque Escorial and other potential rental property
        opportunities.
 The
        Company will evaluate and determine on a continuing basis, depending upon
        market
        conditions and the outcome of events described under the section titled
        "Forward-Looking Statements," the most efficient use of the Company's capital,
        including acquisitions and dispositions, purchasing, refinancing, exchanging
        or
        retiring certain of the Company's outstanding debt obligations, distributions
        to
        shareholders and its existing contractual obligations.
 
 **ITEM
                  3.**
              **QUANTITATIVE
                  AND QUALITATIVE DISCLOSURES ABOUT MARKET
                  RISK**
 
 The
        Company is exposed to certain financial market risks, the most predominant
        being
        fluctuations in interest rates.  Interest rate fluctuations are
        monitored by the Company's management as an integral part of the Company's
        overall risk management program, which recognizes the unpredictability of
        financial markets and seeks to reduce the potentially adverse effect on the
        Company's results of operations.
 As
        of
        June 30, 2007, there have been no material changes in the Company's financial
        market risk since December 31, 2006, as discussed in the Company's Annual
        Report
        on Form 10-K.
 
 **ITEM
                  4.**
              **CONTROLS
                  AND PROCEDURES**
 
 **Evaluation
        of Disclosure Controls and Procedures**
 In
        connection with the preparation of this Form 10-Q, as of June 30, 2007, an
        evaluation was performed under the supervision and with the participation
        of the
        Company's management, including the CEO and CFO, of the effectiveness of
        the
        design and operation of our disclosure controls and procedures as defined
        in
        Rule 13a-15(e) under the Exchange Act. In performing this evaluation, management
        reviewed the selection, application and monitoring of our historical accounting
        policies. Based on that evaluation, the CEO and CFO concluded that these
        disclosure controls and procedures, because of the material weakness in internal
        control discussed below, were not effective in ensuring that the information
        required to be disclosed in our reports filed with the SEC is recorded,
        processed, summarized and reported on a timely basis.
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  During
        the preparation of the Company's 2004 tax returns in the fourth quarter 2005,
        the Company became aware that certain intercompany interest income was subject
        to U.S. withholding tax when the interest was paid and certain income from
        its
        Puerto Rico operations could be treated as income of ACPT even though it
        was not
        distributed to ACPT. The Company determined that neither the obligation to
        pay
        the withholding tax or exposure related to the tax status had been previously
        accrued. Accordingly, the Company announced on November 15, 2005, that the
        Company would restate financial statements for the periods covered in its
        Form
        10-K for the fiscal year ended December 31, 2004, and the Forms 10-Q for
        the
        first two quarters of fiscal 2005 to correct previously reported amounts
        related
        to these income tax matters.
 The
        Company determined the accounting errors referenced above indicated a material
        weakness in internal controls with respect to accounting for income taxes. 
A material weakness in internal control is a significant deficiency, or
        combination of significant deficiencies, that results in more than a remote
        likelihood that a material misstatement of the financial statements would
        not be
        prevented or detected on a timely basis by the Company.  The Company has
        implemented controls and procedures designed to remediate this material
        weakness. These controls and procedures include hiring a new Director of
        Tax who
        will help manage the tax compliance and tax accounting process, retaining
        international tax advisors to provide the Company with updates related to
        changes in international tax laws impacting the Company, providing in-house
        tax
        professionals and senior financial management with additional training to
        enhance their awareness of potential international tax matters and
        implementation of other additional control procedures related to accounting
        for
        income taxes.  In order to remediate the material weakness, management
        must ensure that these new controls
 and
        procedures are operating effectively and fully address the risks giving rise
        to
        the material weakness.  Management believes that once sufficient
        evidence of the operating effectiveness of these controls exists, the material
        weakness will be fully remediated.
 
 **PART
                  II**
              **OTHER
                  INFORMATION**
 
 **ITEM
                  1.**
              **LEGAL
                  PROCEEDINGS**
 
 See
        the
        information under the heading "Legal Matters" in Note 5 to the consolidated
        financial statements in this Form 10-Q for information regarding legal
        proceedings, which information is incorporated by reference in this Item
        1.
 
 **ITEM
                  1A.**
              **RISK
                  FACTORS**
 
 There
        has
        been no material change in the Company’s risk factors from those outlined in the
        Company’s Annual Report on Form 10-K for the year ended December 31,
        2006.
 
 **ITEM
                  2.**
              **UNREGISTERED
                  SALES OF EQUITY SECURITIES AND USE OF
                  PROCEEDS**
 
 None.
 
 **ITEM
                  3.**
              **DEFAULTS
                  UPON SENIOR SECURITIES**
 
 None.
 
 **ITEM
                  4.**
              **SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY
                  HOLDERS**
 
 ACPT
        held its 2007 Annual Meeting of
        Shareholders on June 6, 2007.  At the Meeting, shareholders elected
        two individuals to serve as trustees for a three year timer to expire at
        the
        Annual Meeting in 2010.
 
 The
        results of the voting were as
        follows:
 Trustee
                Votes
                    For
                Votes
                    WithheldJ. Michael Wilson
                4,247,236
                200Thomas
                    J. Shafer
                4,246,986
                450
 
 The terms of Edwin L. Kelly, Thomas S. Condit, Antonio Ginorio, and T. Michael
        Scott continued after the meeting and each continue to serve as a
        trustee.
 
 **ITEM
                  5.**
              **OTHER
                  INFORMATION**
 
 None.
 
 **ITEM
                  6.**
              **EXHIBITS**
 
 (A)
              Exhibits10.1
              Summary
                  of Non-Employee Trustee Compensation31.1
              Rule
                  13a-14(a)/15d-14(a) Certification of Chairman and Chief Executive
                  Officer31.2
              Rule
                  13a-14(a)/15d-14(a) Certification of Chief Financial Officer32.1
              Section
                  1350 Certification of Chairman and Chief Executive Officer32.2
              Section
                  1350 Certification of Chief Financial Officer
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  **SIGNATURES**
 
 
 Pursuant
        to the requirements of the Securities and Exchange Act of 1934, the registrant
        has duly caused this report to be signed on its behalf by the undersigned
        thereunto duly authorized.
 
 AMERICAN
                  COMMUNITY PROPERTIES TRUST(Registrant)Dated:  August
                  13, 2007
              By:
              /s/
                  J. Michael
                  WilsonJ.
                  Michael Wilson
                Chairman
                  and Chief Executive OfficerDated:  August
                  13, 2007
              By:
              /s/
                  Cynthia L.
                  HedrickCynthia
                  L. Hedrick
                Chief
                  Financial OfficerDated:  August
                  13, 2007
              By:
              /s/
                  Matthew M.
                  MartinMatthew
                  M. Martin
                Chief
                  Accounting Officer
 
 
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